Bombay H.C : Whether, on the facts and in the circumstances of the case, for the purposes of s. 40(c)(iii)/40 (a)(v), what is to be taken into account is the value of the benefit or amenity or perquisite in the hands of the employee on account of any expenditure incurred by the employer and not the entire expenditure incurred by the employer ?

Counsel Appeared

I.M. Munim with S.J.Mehta, for the Assessee : V.R. Bhatia with S.V.Naik & K.C.Sidhwa, for the Revenue

S.P. BHARUCHA, J.:

This reference under s. 256(1) of the IT Act, 1961, is made at the instance of the assessee in regard to the asst. yrs. 1967-68 to 1970-71. Three questions are raised which read thus :

“(i) Whether, on the facts and in the circumstances of the case, for the purposes of s. 40(c)(iii)/40 (a)(v), what is to be taken into account is the value of the benefit or amenity or perquisite in the hands of the employee on account of any expenditure incurred by the employer and not the entire expenditure incurred by the employer ?

(ii) Whether, on the facts and in the circumstances of the case, the provisions of s. 40(c)(iii)/40(a) (v), applied in the case of the employees of the assessee in its overseas branches ?

(iii) Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under s. 35B in respect of the expenditure of Rs. 1,95,935 incurred on export of tea from East Africa to the United Kingdom ? “

It is common ground that the first and the second questions are covered by the judgment of this Court in the assessee’s own reference relating to the asst. yrs. 1964-65 and 1965-66. It is agreed that, following the judgment in Bombay Burmah Trading Corporation Ltd. vs. CIT (1983) 32 CTR (Bom) 306 : [1984] 145 ITR 793 (Bom), the first question must be answered in the negative and in favour of the Revenue and the second must be answered in the negative and in favour of the assessee.. These questions are, accordingly, so answered.

The third question which is contested arises in relation only to the asst. yr. 1970-71. The assessee is a resident company. It derives income from the sale of tea and coffee from its estates in South India. It also derives income from businesses in a number of foreign countries. The assessee claimed weighted deduction under s. 35B in respect of the sum of Rs. 1,95,935, being the expenditure incurred on the export of tea from its East African branches to the United Kingdom.

The ITO took the view that weighted deduction under s. 35B was available only if exports were made from India. This was also the view of the AAC in the assessee’s appeal. It was affirmed in further appeal by the Tribunal, which held that the word “export” in the context of an Indian company could only mean the sending out of goods from India. The Tribunal drew support for its view from the provisions in regard to export markets development allowance that had appeared in the earlier Finance Acts. It also gave due regard to what it considered to be the rationale of section 35B.

For our purposes, the relevant portions of s. 35, which deal with export markets development allowance, are these: “(1)(a) Where an assessee, being a domestic company or a person (other than a company) who is resident in India, has incurred after the 29th day of February, 1968, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in cl. (b), he shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year ; (b) The expenditure referred to in cl. (a) is that incurred wholly and exclusively on- (i) advertisement or publicity outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business……. (viii) performance of services outside India in connection with, or incidental to, the execution of any contract for the supply outside India of such goods, services or facilities.” it is not in dispute that the assessee satisfied all the requirements of s. 35B, except in regard to the requirement, according to the Revenue, that the export should be made from India. To get the advantage of the deduction under s. 35B, the expenditure has to be incurred wholly and exclusively on the performance of services outside India in connection with or incidental to the execution of any contract for the supply outside India of goods which the assessee deals in the course of its business. The assessee deals in tea in the course of its business.

The expenditure was incurred in regard to the performance of services outside India, i.e.., in East Africa and the United Kingdom, in connection with the execution of a contract for the supply of tea in the United Kingdom. The provision does not require that the export should be from India. The provision, read plainly, entitles the assessee to the deduction thereunder.

The language of s. 35B being plain and unambiguous, no recourse need or can be had to any external aids to interpretation.

Having regard to the plain language of s. 35B, therefore, we answer the third question in the affirmative and in favour of the assessee.

No order as to costs.

[Citation : 188 ITR 122]