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TMI Blog1984 (12) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ere to keep the matter alive on the following items: . . Rs (1) General Expenses 8,425 (2) Repairs to building 9,675 (3) Fire & General Insurance 5,711 (4) Bungalow maintenance 5,813 (5) LTA, Rent, bungalow and passage 12,000 (6) Passage and leave travel allowance 1,840 (7) Godown rent 11,950 (8) Garage rent 41,234 It was also stated that Ground No. 2 is not pressed. Therefore, we confirm the order of the CIT(A) on the items mentioned hereafter for the disallowance of weighted deduction: Ground No. (1). (1) Bank charges Rs. 1,811 (2) Repairs to machinery Rs. 3,922 (3) Repairs to furniture Rs. 2,865 (4) Rates and taxes Rs. 11,265 (5) Marine Insurance Rs. 1,298 (6) Research and Development expenses Rs. 594 Ground No. (2) (1) Electricity 50 per cent (2) Newspaper & periodicals 50 per cent (3) Postage 50 per cent (4) Telegrams 50 per cent (5) Telephones 50 per cent (6) Medical expenses 75 per cent (7) Staff welfare 75 per cent (8) Uniforms 75 per cent Now we have to consider whether weighted deduction is to be allowed on the remaining items of expenditure mentioned above. The contention of the ld. counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used by them and taxes, etc. paid on the items of goods exported are to be taken as expenses for the purpose of export. We do not accept this contention as there is no substance in it in view of the decision of the Hon'ble Madras High Court. Moreover these expenses are in India and furniture in the bungalow and its repair is there to provide facility to the managing director and therefore, it has no nexus with the export business and it cannot be taken that as salary to the managing director and the employees allowed at the rate of 75 per cent, therefore, the weighted deduction is also to be allowed accordingly on these expenses, we hold that building repairs, furniture, godown rent, garage rent, fire and general insurance are the expenses incurred within India and there is no material on record to prove that these are exclusively solely for the purpose of export business and it cannot be there in the case of the assessee in view of the facts that the assessee is having export and local business. Moreover, these expenses are in Indian and there is no nexus between the export business and these expenses to prove that these are wholly and exclusively for the purpose of export busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Madras High Court we hold that the assessee is not entitled to weighted deduction on these items of expenses. Since the authorities below have rejected the claim of the assessee for weighted deduction on these items of expenditure, hence we confirm the impugned order holding further that it is in accordance with the decision of the Madras High Court. The appeals are dismissed. August, 1983. C. R. NAIR, A. M.: I have gone through my ld. brother, the Judicial Member's order. With great respect. I wish to dispose of the appeals differently. 2. The assessee-company has an export division for export of handloom goods. Regarding the export division expenditure the assessee claimed deduction under s. 35B (export market development allowance) for the asst. yr. 1974-75 before the ITO inter alia on the following items, consequent on the Tribunal's order dt. 28th Jan., 1980 in ITA No. 158/Mad/1978-79 restoring the issue of weighted deduction for fresh direction to the ITO: . . Rs 1. Provident Fund--General 13,825 2. Bank charges 1,811 3. General expenses 8,425 4. Repairs to machinery 3,922 5. Repairs to building 9,675 6. Repairs to furniture 2,865 7. Rates & tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ascertaining the eligible expenditure in this manner, the ITO should allow 50 per cent of the eligible expenditure as weighted deduction. It must be noted that only expenditure debited to the P & L a/c will be eligible for weighted deduction but not the expenditure debited to the manufacturing account or the trading account." 3. The assessee is before us in appeal against the CIT(A)'s order. Though the assessee's written grounds of appeal contained a number of items, the assessee's ld. counsel at the time of hearing restricted the claim to the following items: 1. General expenses Rs. 8,425 2. Repairs to building Rs. 9,675 3. Fire and General Insurance Rs. 5,711 4. Bungalow maintenance Rs. 5,813 5. LTA, Rent, Bungalow & passage Rs. 12,000 6. Passage & LTA Rs. 1,840 7. Godown rent Rs. 11,950 8. Garage rent (sic) Rs. 41,234 The ld. counsel for the assessee submitted that the assessee was entitled to weighted deduction on 75 per cent of Sl. Nos. 4, 5 and 6, which related to the export manager Mr. Kozcki, since this item should be treated as part of his remuneration and the ITO had allowed weighted deduction on 75 per cent of the salaries paid includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) to (ix). The Tribunal further went on to say: "We would add that whatever of the common expenses incurred by an assessee that could properly and fairly be apportioned on any of the activities referred to above any also be taken for the purposes of the section as wholly and exclusively on such activity. As already mentioned, no hard and fast rule is possible to be outlined as to how such apportionment should be effected. Nor is it possible to postulate in a general discussion what all kinds of expenditure can properly be brought under the various sub-clauses of s. 35B(1)(b). Whether a particular claim raised by an assessee falls under any one or more of the activities falls under any one or more of the activities specified in those sub-clauses can at best be judged only with reference to the facts of the particular case and the nature of the claim." It will thus be seen that the Special Bench also insisted that the expenditure should be wholly and exclusively incurred on the specified activities in s. 35B(1)(b) but regarding common items of expenditure such as salary, stationery, etc. where the expenses would also include items not related to the specified activities, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the assessee's contention that they in effect form part of the remuneration paid to the export manager and therefore eligible for weighted deduction. Similarly regarding repairs to building, godown rent and garage rent (stated to be actually export office rent) the assessee's contention is that these items represent rent and other incidental expenses relating to the office premises. However, the orders of the ITO and the CIT (A) do not given the details regarding the nature of the expenditure nor the reasons for the rejection of the assessee's claim. The factual position regarding the above item is not clear and hence it becomes difficult to adjudicate on the assessee's claim. I am hence of the view that the CIT (A) finding regarding weighted deduction on the above items should be vacated and the matter should go back to the CIT (A) for fresh decision according the law after giving due opportunity to both to parties. 6. For the asst. yr. 1975-76 the position is similar. Though the assessee's grounds of appeal before us contained a number of items, at the time of hearing the ld. counsel for the assessee restricted the assessee's claim to the following items: 1. General expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Special Bench decision of the Tribunal dt. 17th June, 1978 in ITA Nos. 3255 & 3330 (Bom)/1976-77 in the case of J. Hemchand & Co., as not being contrary to the Madras High Court decision in (1983) 140 ITR 855 (Mad) (CIT vs. Southern Sea Foods (P) Ltd.); or whether it should be held by the Tribunal that the ratio laid down by the above decision of the Tribunal is not good law in view of the Madras High Court decision in (1983) 140 ITR 855?" 2. The assessee-company, inter alia, carrier on export business in handlooms. For the asst. yrs. 1974-75 and 1976-77, it claimed weighted deduction under s. 35B of the IT Act, 1961, in respect of certain items of expenditure. The ITO disallowed the claim. On appeal, the CIT(A) partly allowed the same. On further by the assessee, the Tribunal, set aside the order of the CIT (A) and restored the case to the file of the ITO for re- deciding the claim of the assessee in the light of the decision of the Special Bench of the Tribunal, in the case of "J. Hemchand & Co.". 3. Thereafter, the ITO partly allowed the claim of the assessee for each of the asst. yrs. 1974-75 and 1975-76. On appeal, the CIT(A) granted further relief to the assessee in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Special Bench of the Tribunal in the case of J. Hemchand & Co. was not in any way, contrary to the decision of the Madras High Court in the case of "Southern Sea Foods (P) Ltd". He pointed out that the Madras High Court had laid down in (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad) that the conditions of s. 35B should be strictly complied with, and the Special Bench of the Tribunal had also insisted that the expenditure should be wholly and exclusively incurred on the specified activated in s. 35B(1)(b). So, according to him, there was no contradiction in the two decisions. On merits, the ld. Accountant Member hold that the assessee was not entitled to weighted deduction in respect of the items of expenditure under the heads (i) General expenses, (ii) Repairs to buildings and (iii) Fire and General Insurance. As regards the other items of expenditure, he directed the CIT(A) to re-examine the case and decide the matter afresh inasmuch as the factual position in respect of these items of expenditure was not clear. 8. It is in these circumstances that the aforesaid question has been referred to me for resolving the dispute. 9. After going through the record and hearing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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