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TMI Blog1982 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the following expenditure incurred by it : Items Farrukhabad Delhi Total Rs. Rs. Rs. Samples 11,324 17,269 F. Postage 15,352 3,065 Commission 10,560 50,798 Payments to Cotton Textiles (1/4 disallowed) 3,234 nil Payments to Handloom Export Promotion Council, Madras (1/4) 4,531 nil Service Charges 12,504 Expenditure in respect of Rent, Salaries, Delhi Office 17,650 Rent, Salaries, Farrukhabad 15,710 Payment to Apparel Export Promotion Council --- 745 Sales Promotion to Customers 5,763 Bank commission 21,883 Foreign E.C.G.C. 1,734 ------------ -------------- -------------- 84,328 1,07,792 1,92,120 ------------ -------------- -------------- 1/3rd comes to Rs. 64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a recourse to the alternative provisions. Since the assessee's case does not fall under either of the clauses to section 35B the claim under section 35B is ignored." 4. In appeal before the Commissioner (Appeals) it was submitted, on behalf of the assessee, that, since it was an 'Industrial Undertaking' as defined in section 35B(1A), read with section 32A(2), of the Act, it was entitled for weighted deduction as claimed by it. It was also submitted that the assessee, being a small scale exporter, comes within the definition of Small Scale Industrial Undertaking, the ITO ought to have allowed the assessee's claim for weighted deduction of Rs. 64,040. The Commissioner (Appeals), however, upheld the action of the ITO as under : "I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking' for claiming the benefit of a 'Small Scale Exporter' of goods under section 35B(1A) of the Act. 6. The items of expenditure on which the deduction has been claimed also do not merit for allowance under section 35B of the Act. I therefore, hold that the ITO was justified in not allowing the benefit of the claim under section 35B for an amount of Rs. 64,040." 5. Being aggrieved by the order of the Commissioner (Appeals), the assessee has come up in appeal before the Tribunal. Inviting our attention to the relevant portions of sections 35B and 32A, the learned counsel for the assessee submitted that, since the assessee was an 'Industrial Undertaking', the Commissioner (Appeals) ought to have accepted the assessee's claim for wei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, the learned representative for the department strongly relied on the orders of the income-tax authorities and justified their action. Inviting our attention to Annexure 'A' to the assessment order giving depreciation chart, the learned representative for the department highlighted the fact that the assessee had not any machinery/plant worth the name by virtue of which it can be claimed to be an 'Industrial Undertaking'. He also referred to us page 875, Vol. I of the Book of Kanga and Palkhivala, 7th Edition. 6. We have considered the rival submissions of the parties and we find considerable force in the submissions made on behalf of the assessee. The relevant portions of sections 35B and 32A read as under : "35B. (1A) Notwithstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation below sub-section (2) of section 32A." "32A. (2) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed ten lakh rupees ; and for this purpose the value of any machinery or plant shall be,-- (a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee ; and (b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant." The short question with which we are con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and cut into pieces, the original identity of the cloth is not lost but a change is brought about as a result of going through these different processes and the end product is different from the feed in material. The methods or techniques adopted to convert the plain white cloth into printed and dyed bed-spreads, scarves and garments entities the business to be treated as an industrial undertaking belonging to the firm of which the assessee is a partner. The assessee is, therefore, entitled to claim exemption with regard to the value of his interest in the undertaking under section 5(1)(xxxii) of the Act." In view of what is stated above, the stand taken on behalf of the assessee that it is an 'Industrial Undertaking' is unassailable. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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