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TMI Blog2002 (7) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ot eligible for weighted deduction, as required under sub-clause (viii) of sub-section (1)(b) of section 35B of the Income-tax Act, 1961. Tribunal was not justified in holding that weighted deduction under section 35B of the Income-tax Act, 1961, is admissible on technical director's salary - - - - - Dated:- 12-7-2002 - Judge(s) : Y. R. MEENA., SHASHI KANT SHARMA. JUDGMENT On an application filed under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that weighted deduction under section 35B of the Income-tax Act, 1961, is admissible on technical director's salary amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India, there is no question of allowing the weighted deduction on salary paid to the technical director who rendered services in India. He placed reliance on the decision of the apex court rendered in the case of CIT v. Hero Cycles (P) Ltd. [1997] 228 ITR 463 and also on the decision of the Calcutta High Court in the case of Brooke Bond India Ltd. v. CIT [1992] 193 ITR 390. Mr. Pandey, learned counsel for the assessee, submits that when the services of the technical director were for the export service though in India, the assessee is entitled for the weighted deduction on salary paid to the technical director. He further submits that the business of the assessee is 100 per cent. of export and the case of the assessee comes under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be entitled to get this deduction. The Tribunal has allowed the deduction without verifying or examining the sub-clauses under which this could be allowed." A similar view has been taken by the Calcutta High Court in the case of Brooke Bond India Ltd. v. CIT [1992] 193 ITR 390. The Calcutta High Court Bench has quoted the observations made by the Madras High Court in the case of V. D. Swami and Co. (P.) Ltd. v. CIT [1984] 146 ITR 425 and observed that the view taken by the Madras High Court is in consonance with the view that only specified items of expenditure have been given the benefit of weighted deduction under section 35B. The relevant observations of the Madras High Court are reproduced as under: "To maintain that wei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1)(b) of section 35 which has been reproduced above. The sub-clause starts with the opening words "performance of services outside India, in connection with, or incidental to, the execution of any contract for the supply out side India of such goods, services or facilities." If we go by the plain language of the said sub-clause, the condition precedent for weighted deduction on a salary of the person is that he should perform the services outside India. Admittedly, the technical director had rendered the services in India and not outside India and when the services had been rendered by the director in India and he has been paid the salary for the same in India, in our view, the payment does not come under sub-clause (viii) of sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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