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TMI Blog1981 (8) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... g the claim of the assessee for weighted deduction under section 35B of the Income-tax Act, 1961, with regard to what may conveniently be referred to as the indirect exports. The claim of the assessee for weighted deduction was over the commission paid to selling agents and the salary of the staff engaged in export. This claim was dealt with by the Tribunal as follows: "Coming now to the commission paid to selling agents, we find, prima facie, that the AAC's action is justified. However, the AAC has not gone into the details and brought on record particular or express conditions under which the sales were made to certain parties with a condition to export by them. The claim in respect of the salary to the export staff is also linked up wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embodied on the first page of the contract. It was emphasised by Shri Rathi, Financial Controller, that it was the assessee who was instrumental in exporting the goods and that the intervention of the local parties does not make any difference to the nature of the transaction. The benefit of export incentives or import entitlements flowing from export performance accrues to the assessee and not to the party through whom the goods are exported." "The brokers who operate in the market have the knowledge about the local parties who are allotted quota by the Cotton Textile Export Promotion Council. They bring about the manufacturer of goods and the local parties, having the quota allotment, together. They are paid brokerage at the rate of 1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are made by the assessee by first selling the goods to persons who have been allotted export quota by the Export Promotion Council and then ensuring that the goods are actually exported by them. 5. Section 35B, so far as it is relevant for the present purpose, provides that where an assessee has incurred, whether directly or in association with any other person, any expenditure referred to in clause (b) of the section and which is not of the nature of capital expenditure or personal expenses, he shall be allowed weighted deduction on the expenditure as provided in the section. The contention of the department is that the export in the present case is not by the assessee but by local parties to whom the assessee has sold the goods. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the Legislature. This principle has to be kept in mind while considering the scope of the expression referred to above. The purpose of section 35B is obviously to increase export by giving inducements for the same. The assessee is a mill, producing textiles. Although it appears that it can export directly a portion of the goods produced by it, for further export it has to depend upon the persons who have been allotted quota for export by the Export Promotion Council. If these persons purchase goods from the assessee in the normal course of business and then subsequently export the same, it is clear that the assessee cannot claim any credit for such exports. But, the position in the present case is quite different. The assessee, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits arising from the export of the goods. If it was a case of the ordinary sale of the goods to a local person, there is no question of seller claiming the benefits arising from the export. Thus, considering the provisions of the standard contract and the circumstances and conditions under which the sale is effected by the assessee to the local person, it is very clear that the exercise is for the export of the goods. Although there is a passing of the title of the goods from the assessee to the local person before the actual export, it is only incidental to the larger scheme of the export of the goods to which both the assessee and the local person are equally committed. The export is possible only by an association of the two becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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