9911796707
TMI Blog1984 (6) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby that the assessee was entitled to the entire claim under section 35B in respect of this item whereas in respect of some other items, the assessee was entitled to the claim to the extent of 75 per cent. The ITO allowed the assessee's claim 'as per last year's order and keeping in view the directions issued by the IAC, Companies Range-I, under section 144B'. 2. On a perusal of the assessee's record, the Commissioner observed that the ITO had allowed weighted deduction of Rs. 59,61,100 on an amount of Rs. 1,78,83,301 being the commission paid to the overseas agents. The Commissioner observed that the deduction was allowed by the ITO under section 35B(1)(b)(iii) as claimed by the assessee. According to him, under the aforesaid provision of the Act, weighted deduction was permissible in respect of the expenditure incurred wholly and exclusively on distribution, supply or provision outside India of goods, services or facilities, where such expenditure was incurred before 1-4-1978. As the assessee's accounting period for the present assessment year began on 1-4-1978, as such, the aforesaid commission incurred after that date was not eligible for relief under section 35B. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment under instructions from the IAC issued under section 144B, the ITO's order merged with that of the IAC's instructions under section 144B and such an order could not be interfered with by the Commissioner under section 263. Our attention is invited to the observations made by the ITO in the assessment order to the effect that the decision in this respect was taken by the ITO in view of the instructions issued by the IAC under section 144B. 5. On behalf of the revenue, our attention is invited to the draft assessment order submitted by the ITO to the IAC and the instructions of the IAC dated 23-9-1982 in this respect. It was stated on behalf of the revenue that the ITO himself had proposed to grant relief under section 35B in respect of this item of expenditure amounting to Rs. 1,78,83,301. Therefore, the IAC had not issued any instructions under section 144B with reference to this item of expenditure. In this connection, our attention was invited to the Tribunal Special Bench decision in the case of East Coast Marine Products (P.) Ltd. v. ITO [1983] 4 ITD 73 (Hyd.) in IT Appeal No. 1398 (Hyd.) of 1980 decided on 16-3-1983 wherein the learned Members of the Special B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the guidelines in the Tribunal Special Bench decision in the case of J. H. Co. He has allowed it 'as per the last year's order and keeping in view the directions issued by the IAC, Companies Range-I, under section 144B '. The learned counsel proceeded to point out that for the year under consideration the IAC has not issued any instructions under section 144B in respect of this item as discussed in paragraph 6 above. It was submitted by the learned counsel that even in the preceding assessment year, i.e., for the assessment year 1978-79, there was no dispute concerning this item and, therefore, the IAC had no occasion to issue any instructions under section 144B in respect of this item. He has furnished a copy of the instructions under section 144B(4) dated 16-4-1977 for the assessment year 1974-75 where the IAC had issued directions for allowance of the claim for relief under section 35B in respect of the expenditure of Rs. 15,51,043 for that assessment year on payment of commission to foreign agents again without reference to the sub-clause of section 35B(1)(b). Therefore, there were no instructions from the IAC under section 144B for the present year as well as for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (iii) of section 35B(1)(b) was deleted from the statute book with effect from 1-4-1981 by the Finance (No. 2) Act, 1980. Apparently, the Commissioner was labouring under some misapprehension as to the state of law even if the assessee's claim fell under sub-clause (iii) of section 35B(1)(b). 10. Apart from the assessee's objection on the wrongful assumption of jurisdiction under section 263 by the Commissioner, the learned counsel for the assessee has proceeded to support the ITO's action in allowing this relief in the case of the assessee on the facts and in the circumstances of the case as discussed earlier in this order. The learned counsel has pointed out that the assessee had made the claim under section 35B without indicating the sub-clause of section 35B(1)(b) under which the assessee's claim was admissible. The ITO had apparently allowed the claim under sub-clauses (i) and (ii) as mentioned in paragraph 8 above. The question, according to the learned counsel, was whether in the first instance the Madras High Court decision in the case of Southern Sea Foods (P.) Ltd. in any manner disentitled the assessee from claiming this relief. No doubt, the Madras High Court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (Rupees in crores) 1974-75 20.09 0.16 1975-76 32.20 0.33 1976-77 54.86 0.67 1977-78 81.94 0.85 1978-79 84.00 0.88 1979-80 84.00 1.79 --------------------------------------------------------------------------------------------------------------------------------------------------- The payments to these agents were made abroad. As to the nature of the services rendered by these agents, the learned counsel has placed before us copies of the agreements with the various agents from which it was pointed out that the agents rendered the following services : 1. to exert with diligence his best efforts to promote, expand, advance and develop foreign and export business of the appellant and to that end-- a. explore and study market conditions prevailing in the world markets ; b. establish business connection with prospective buyers and secure orders from them for purchase of the appellant's products ; 2. to be responsible for sales negotiations covering the entire range of activity including-- a. canvassing ; b. visiting prospective buyers and collect information regarding their requirements ; c. organising demonstrations of the appellant's products and serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was eligible for relief under sub-clause (iv) and also under sub-clause (viii). Our attention was invited to the Tribunal decision in the case of Indian Hotels Co. Ltd. v. ITO in IT Appeal No. 467 (Bom.) of 1975-76 decided on 30-9-1976. The Tribunal has held in unambiguous terms that the various sub-clauses of section 35B(1)(b) were overlapping and the assessee could be held to be entitled to relief under various sub-clauses at the same time. The revenue had sought a reference to the High Court under section 256(1) of the Act, which was rejected. Having failed under section 256(2) before the Bombay High Court, the revenue approached the Supreme Court with a special leave petition, which was also rejected. In the circumstances, it was submitted that there was no substance in the argument on behalf of the revenue that the assessee had to make the claim only under one sub-clause in respect of one specific item of expenditure and none other. 13. We have carefully considered the facts and circumstances as to the further objection on behalf of the assessee to the order of the Commissioner. The assessee had preferred the claim under section 35B without specifying the sub-clause of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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