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TMI Blog1993 (2) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in holding that cash payments made by the assessee to its employees by way of reimbursement of medical expenses should be taken into account for the purpose, of computing disallowable expenditure under section 40A(5) for the assessment years 1972-73 and 1973-74 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that no weighted deduction under section 35B was allowable for the assessment years 1972-73 and 1973-74 in respect of the commission amounts of Rs. 5,09,195 and Rs. 3,71,718, respectively ? " The questions referred to at the instance of the Revenue are : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this view of the matter, the assessee would not be entitled to development rebate on such assets. It is an agreed position that the issue raised in question No. 2 referred to us at the instance of the Revenue is covered by the decision of the Supreme Court in the case of Escorts Ltd. v. Union of India [1993] 199 ITR 43, in favour of the Revenue. In this view of the matter, we answer this question in the negative, i.e., in favour of the Revenue and against the assessee. Now, we shall deal with the issue raised in question No. 2 referred to us at the instance of the assessee. The assessee is a company engaged in the manufacture of insulating enamels, varnishes and resins for the electrical industry. The assessment years are 1972-73 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .This commission was paid to the German company for giving permission to the assessee to export products to the U. S. S. R. This action of the Income-tax Officer was confirmed by the first appellate authority and thereafter by the Tribunal. It may be mentioned that while confirming the action of the Income-tax Officer, the Tribunal was of the view that the commission though paid to the German company did not fall in any ofthe sub-clauses, i.e., sub-clauses (i) to (ix) of clause (b) of sub-section (1) of section 35B of the Act. The Tribunal further held that the payment of commission to the German company was nothing but compensation paid to the German company for allowing the assessee to do the business in the U. S. S. R. The Tribunal furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-83 Was not produced or available on the record in respect of the years under reference. We may also mention that learned counsel for the assessee has also filed an affidavit dated February 9, 1993, in this connection, wherein the additional material on which the assessee had relied for the assessment year 1982-83 is stated. After some discussion with learned counsel for the assessee, we indicated to him that it was not possible at this late stage to entertain his request for sending the matter back to the Tribunal with appropriate directions. We, therefore, requested him to make his submission on the merits of the case. Learned counsel for the assessee submitted that since the provisions of section 35B are incentive provisions for augme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities as well as the Tribunal wherein they have clearly stated that the so called commission was paid by way of compensation to the German company. According to him, since there was no direct or indirect nexus between the payment of the commission and export of goods to the U. S. S. R., there was no question of granting any weighted deduction to the assessee in respect of commission payment to the German company. In order to resolve the dispute, it would be necessary to refer to the relevant provisions of the Act. Section 35B of the Act provides for weighted deduction known as " export markets development allowance ". The relevant portion of the said section reads as under : " 35B. (1)(a) Where an assessee, being a domestic company o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness carried on by it. In the instant case, there was already an arrangement with the German company to supply goods to certain Asian countries without any payment of commission. However, when the assessee thought of exporting goods to the U. S. S. R., it approached the German company for the necessary permission. The German company agreed to the supply of such goods to the U. S. S. R. provided it was paid commission on certain percentage basis. Surely this type of arrangement cannot fall within the purview of sub-clause (iii) of clause (b) of sub-section (1) of section 35B of the Act. In fact, as noted above, the Tribunal has given a clear finding that nothing was brought on record to suggest that the German company had obtained any orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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