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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 ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for the assessee to prove that the expenses incurred are wholly and exclusive on export and are actually expended for this purpose. The assessee has not brought any material on record to prove it, rather he has stated that when salary to employees employed in the Export Department of the assessee has been allowed at the rate of 75 per cent, then the expenses on the building where such employees resided and the furniture 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent regarding the employees who are working in the Export Department of the assessee, then on the same analogy it is to be allowed on the aforesaid items of expenditure. We do not see any force in this contention of the assessee as the weighted deduction is to be allowed on any expenditure if the assessee has brought such items of expenditure in any category of s. 35B(1)(b)(i) and proved that it is expenditure on such items wholly and exclusively for the purpose of export business. This criteria laid down by the Hon'ble Madras High Court has not been met by the assessee and therefore, following the aforesaid decision of the Hon'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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exhaustively dealt with the quantification of the relief under s. 35B in the case of J. Hemchand Co. vs. the ITO, B-II Ward, Bombay in ITA No. 3255/76- 77 dt. 17th June, 1978. I followed that decision in my appellate order dt. 19th Aug., 1982. I shall follow the same principles for disposing of the present appeal also. In the result, the assessee will get weighted deduction in respect of the following items of expenditure appearing in its P L a/c. Salaries ....100 per cent Provident Fund .... 100 per cent Printing Stationery ....100 per cent Sales Promotion expenses ....100 per cent Electricity ....50 per cent Newspapers periodicals ....50 per cent Postage ....50 per cent Telegrams ....50 per cent Telephones ....50 per cent Medical expenses ....75 per cent Staff welfare ....75 per cent Samples ....100 per cent Uniforms ....100 per cent Export Credit Guarantee Corporation ....100 per cent After ascertaining the eligible expenditure in this manner, the ITO shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad), cited supra, goes against the guidelines laid down in the Special Bench decision and that hence the decision is not longer to be followed. In (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad) the High Court observed that s. 35B has laid down strict condition for the grant of weighted allowance and it should be ensured that the statutory conditions are strictly followed. That case was concerned with the issue of commission paid to an Indian company for the purpose of procuring orders from the foreign buyers. The High Court held that none of the sub-clauses of s. 35B(1)(b) applied in that assessee's favour for the detailed reasons given by it and concluded that the assessee was not entitled to the weighted deduction under s. 35B in respect of such commission. The statutory condition laid down in s. 35B is that weighted deduction can be allowed only on the expenditure which is incurred wholly and exclusively on the various items of expenditure detailed in cls. (i) to (ix) of s. 35B(1)(b). The Spl. Bench of the Bombay Tribunal in J. Hemchand Co. vs. Second ITO considered the scope of s. 35B and summarised the features of s. 35B inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of common expenditure such allocation being unavoidable. This interpretation of s. 35B was also accepted by the Board vide Board's Instruction No. 1441 of F. No. 268/738/81-ITJ dt. 28th Dec., 1981. Hence in my opinion the ratio of the Special Bench's decision is not contrary to the High Court judgment and hence it should be followed the decision on principle being also accepted by the Board. 5. In the present case the CIT (A) has observed that he is following the principles laid down in J.H. Co. However, though he has allowed weighted deduction only regarding a number of other items, he has not allowed weighted deduction regarding these items disputed before him and no reasons are given why the assessee is not entitled to weighted deduction on these items also. Taking up the individual items I am inclined to agree with the department that the assessee is not entitled to weighted deduction on general expenditure of Rs. 8,425 since there are no details thereof to support the assessee's claim of weighted deduction. Regarding fire and general insurance which is stated to be related to stock : I am of the view that this will not fall under any of the expenditure specified in the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961. Whereas we are unable to agree on the point set out below for the asst. yrs. 1974-75 and 1975-76, we refer the following point of difference of opinion to the President for reference to Third Member, under s. 255(4) of the IT Act, 1961: "Whether, on the facts and in the circumstances of the case, the Tribunal should consider the assessee's claim for weighted deduction under s. 35B in respect of the items of the expenditure in question incurred in the Export Division on the basis of the Bombay 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 140 ITR 855 (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?" 5th Dec., 1984 Order M. R. SIKKA, VICE-PRESIDENT (Third Member): There being difference of the opinion between the ld. Members of the Tribunal, the following question has been referred to me for decision: "Whether, on the facts and in the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Fire General Insurance. 10,786 4. Bank charges. 1,432 5. Professional charges. 700 6. Repairs to machinery. 4,115 7. Repairs to machinery. 12,793 8. Rates and taxes. 722 9. Marine Insurance. 8,106 5. During the course of arguments before the Tribunal. the ld. representative of the assessee submitted that the claim of the assessee should be allowed according to the decision of the Special Bench of the Tribunal in the case of "J. Hemchand co.". The ld. representative of the department on the other hand, submitted that weighted deduction was to be allowed if the assessee brought the remaining items of expenditure under any categories of s. 35B(1)(b) of the Act and proved that the expenditure was actually expended. He also submitted that the decision of the Madras High Court (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad) was to be taken in view and not that the Special Bench of the Tribunal in the case of "J. Hemchand Co." 6. The ld. Judicial Member observed that the weighted deduction was to be allowed on the items of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its agents who were engaged for the purpose of procuring orders from foreign buyers. The Madras High Court held that since the object of the provisions of s. 35B was not purely fiscal, but, on the contrary, to advance the policy of the State to promote exports, the conditions laid down under s. 35B should be strictly followed before allowing relief to the assessee. On merits, the Madras High Court held that the expenditure incurred by the assessee-company on payment of commission did not satisfy the conditions laid down either under sub-cl. (ii) or sub-cl. (iv) or sub-cl. (viii) of s. 35B(1)(b). The High Court, accordingly, concluded that the expenditure on commission incurred by the assessee was not eligible for weighted deduction. The High Court has not anywhere disapproved the principles laid down by the decision of the Special Bench of the Tribunal in the case of "J. Hemchand Co.". On the contrary, even the Special Bench of the Tribunal has held in para 22 of its judgment in the said case that the expenditure, as contemplated under s. 35B, must be incurred wholly and exclusively on activates referred to in sub-cls. (i) to (viii) of cl. (b) of sub-s. (1) of s. 35B. Evidently, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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