9911796707
TMI Blog1982 (8) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment years involved in these appeals are 1975-76, 1976-77 and 1977-78 for which relevant previous years ended on 31-12-1975, 31-12-1976 and 31-12-1977, respectively. The business of the assessee is mainly of export business. The system of accounting is mercantile. 4 5. [These paras are not reproduced here as they involve minor issues.] 6. Now, we come to the common issue regarding the weighted deduction on the expenditure expended on melting and refining charges paid for silver for the years under consideration. The ITO allowed the export market development allowance to the assessee under section 35B on the items of expenditure of melting and refining of silver for the years under consideration. However, the Commissioner (Appeals) on the perusal of the income-tax records for the assessment years under consideration found that the orders of the ITO for both the years were erroneous insofar as they were prejudicial to the interests of the revenue for the following reasons : "The Income-tax Officer has allowed weighted deduction under section 35B of the Income-tax Act, 1961, on melting and refining charges of Rs. 25,17,966 for assessment year 1976-77 and of Rs. 7,87, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos.--i.e., 713000 and 713827 subsequently is not known. Since this is not relevant, this is ignored. (How debit Note No. 714295 happened to be issued on 16-1-1976 while debit notes bearing earlier Nos.--i.e., 713000 and 713827 subsequently is not known. Since this is not relevant, this is ignored.) (iii) Copy of CIT(A)-II's order No. CIT(A) II/AV/24/1978-79 dated 21-11-1980 in the case of the assessee for assessment year 1975-76. (iv) A copy of CIT, Bombay City VII's order No. BC. VII/RP-1/80-81 dated 17-2-1981 in the case of Nirmal Exports for assessment year 1976-77." On hearing Shri Doshi and going through the record before him, he rejected the explanation and the contention of Shri Doshi to the aforesaid notices and thereby held that in the circumstances, the assessee was not entitled to weighted deduction under section 35B on melting charges as was rightly concluded by the AAC for the assessment year 1975-76 as the ITO had incorrectly allowed such weighted deduction on melting charges for the assessment years under consideration. He thereby directed the ITO to withdraw the weighted deduction allowed by him under the proviso to section 35B for the assessment years unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, such items of expenses are clearly outside the purview of section 35B. To sum up the so-called melting charge is either part and parcel of the cost of silver ingots agreed to be supplied abroad or, in the alternative, not an expenditure incurred by the assessee (leave aside 'wholly and exclusively") connected with or incidental to the supply of goods abroad. In the circumstances, the assessee is not entitled to the weighted deduction under section 35B on such melting charges as was rightly concluded by the IAC for 1975-76. As the ITO has incorrectly allowed such weighted deductions on melting charges in the assessments for assessment years 1976-77 and 1977-78, I hereby direct the ITO to withdraw the weighted deduction allowed by him under the provisions of section 35B in the assessment for assessment years 1976-77 and 1977-78 with reference to the melting charges and to recompute the total income and tax thereon, accordingly." 7. The assessee has preferred these appeals against the orders of the Commissioner under section 263. At the time of hearing these appeals, Shri K.R. Sampath, the learned counsel for the assessee merely contending on merits stated that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptable in foreign market and the charges connected therewith will be a charge on the sale price and the sale price will be redetermined on the basis of 999 purity silver obtained on after melt. or the assessee had agreed to supply silver abroad in ingots as manufactured by foreign assayers and refiners. (c) While invoicing by the assessee, even impurity embedded in the silver ingots as exported from India is also considered as silver. If this impurity is removed abroad on remelting, the same is considered as silver lost on remelting for the purpose of accounting. (d) Even insurance charges, transportation charges, etc., are also deducted from the invoice price depending upon the contract." Thus, there is no doubt in our mind that the assessee has agreed to sell to the foreign buyers all the silver manufactured by the assessee on the terms and conditions stated in the contract referred to above, which say that even if 999 purity of silver as certified by an Indian party is exported, the foreign buyer will not accept the certified goods at its face value. When this is so, then the melting and refining charges incurred in London by the foreign buyers on the silver ingots man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in our view in the decision of the Tribunal in the case of Union Industries [IT Appeal No. 1405 (Bom.) of 1979, dated 9-5-1980] where the judicial member was a party. Besides, the order of the Commissioner is based on cogent and relevant reasons and we do not see that the assessee's counsel has rebutted these reasons of the Commissioner either by making fresh arguments or by bringing fresh material on record ; rather he reiterated the stand of the assessee which was there before the Commissioner, hence, we agree with his reasons. 9. The common issue which is there in the revenue's appeal for the assessment year 1975-76 is ground No. (1) which is as under : "On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding that the expenditure of Rs. 7,32,876 incurred by the assessee on 'Melting and Refining charges' is qualified for weighted deduction under section 35B ?" Since, we have determined this issue in the assessee's appeal for the assessment years 1976-77 and 1977-78 against the assessee, for these reasons, we determine this issue, accordingly, and thereby set aside the order of the Commissioner (Appeals) on this is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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