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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 ..... tter of the present appeal, had been subject-matter of an earlier appeal before the Tribunal as IT Appeal No. 1148 (Bom.) of 1978-79, which was disposed of by the Tribunal by its order dated 21-4-1979. All the matters relating to the assessment year were disposed of by the above order excepting 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer from diverting goods or any portion of goods to local markets within India. During the accounting year relevant to the assessment year 1974-75, the form of contract was slightly different. The obligation on the part of buyer to export goods and not to divert it to the local market was 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 bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent year. 4. There is no dispute about the fact that the assessee is entitled to weighted deduction with regard to the expenditure incurred by the assessee in goods directly exported by the assessee. The dispute now relates to what is called "indirect exports". Indirect exports 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 capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t High Court in CIT v. Satellite Engg. Ltd. [1978] 113 ITR 208 that it is a recognised rule of interpretation of statute that the expression used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute and which effectuates the object 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 Prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The specimen of the export standard contract with the buyer also shows that the sale is not an ordinary local safe, because the latter is not free to deal with the goods as he chooses. Clause 20 of the standard contract provides for the seller (the assessee) to claim its portion of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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