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TMI Blog1979 (11) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... e's claim of weighted deduction under s. 35B and the same are, therefore, disposed of simultaneously. The assessee-firm has been dealing in oil-seeds and spices and its total turnover during the year under consideration was Rs. 99,41,330 out of which the export turnover amounted to Rs. 9,09,701. Out of the total claim made by the assessee in respect of weighted deduction under s. 35B in course of assessment proceedings, the ITO allowed the claim only in respect of Telex charges, subscription and member fees, postage and telegrams and some of the miscellaneous expenses, but disallowed the assessee's claim in respect of the following items: 1. Bank interest 2. Insurance 3. Export guarantee premium 4. Export Survey Consultation cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same Special Bench. The learned authorised representative vehemently submitted that the CIT (A) was not justified in causing distinction between salary of export executive and export survey consultation charges amounting to Rs. 5,000 paid to Shri Gokhale, as it was more or less salary paid to export executives. The Departmental Representative, on the other hand, in this regard submitted that Shri Gokhale had nothing to do so far as export trading of the assessee was concerned. He was employed because of his basic knowledge of chemicals and pharmaceuticals who did same spade work without any success and hence his services were to be terminated. 5. After taking into consideration the rival contentions, we do not think that the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le had done anything for purposes of export business of the assessee. As explained by the assessee before lower authorities: "the services of Shri Gokhale, who was employed because of his knowledge of basic and fine chemicals pharmaceuticals, who did some spade work without any success has to be terminated" does not indicate that Shri Gokhale was contributing anything towards export whatsoever. Under the circumstances, the action of the CIT in respect of payment made to Shri Gokhale also does not call for any interference. 8. The assessee in its claim regarding exchange rate loss amounting to Rs. 7,687 submitted vehemently that it squarely falls u/cl. (viii) of s. 35B. From the reading of cl. (viii), it is clear that expenses which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered that the said expenditure could easily be characterised as entertainment and the same were not merely customery expenses of items like tea, coffee, etc. to the customers. The authorised representative for the assessee sought the allowance of these expenses being petty, whereas the Departmental Representative relied upon the order of the lower authorities. 11. The assessment in this case has been framed at Rs. 2,07,991 and the amount of Rs.790 spent on tea party or lunch party to the Directors of Indian Tube Co. merely by the mention of word "Party" does not make it entertainment. For any disallowance such expenses have to be lavish in nature as indicated by their Lordships of the Bombay High Court in the case of Narsi Nagji(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirm the action of the CIT. In this regard. Sec. 40(b) clearly speaks that in the case of any firm any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm is to be included in the total income of the firm, but there is no such section which speaks of deduction of firm's income on account of interest charged by the firm from a partner. The reliance of the CIT on the case of Ram Mahadevprasad is mis-placed. Their Lordships of the Allahabad High Court in that case held that: "Interest paid to partners of a firm on moneys borrowed from them by the firm could not be deducted in computing the profits and gains of the firm by reason of the provisions of s. 10(2)(iii) and 10(4)(b). There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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