High Court Of Madras
P. Muttulal Lalah & Sons vs. CIT (No. 1)
Asst. Year 1980-81
R. Jayasimha Babu & K. Gananaprakasam, JJ.
TC No. 876 of 1987 (Ref. No. 579 of 1987)
21st February, 2001
Sarath Chandran, for K. Mani, for the Assessee : Mrs. Chitra Venkataraman, for the Commissioner
R. jayasimha babu, J. :
Three questions have been referred to us at the instance of the assessee for the asst. yr. 1980-81. The first of those questions which concerns the eligibility of the assessee to claim weighted deduction in respect of a sum said to be described as establishment charges cannot be, as conceded by counsel, brought under any of the sub-clauses of s.35B of the IT Act, 1961. That claim has rightly been disallowed. The first question is answered against the assessee. It has been held in the case of CIT vs. Stepwell Industries Ltd. (1997) 142 CTR (SC) 345 : (1997) 228 ITR 171 (SC), that the benefit of s. 35B of the Act can be claimed only if the expenditure incurred can be brought under any one of the sub-clauses of that section.
2. So far as the second question is concerned, it concerns the claim for weighted deduction for steamer freight and insurance of CIF contract. The fact that the contract was CIF, and that the expenditure on steamer freight and insurance had been incurred in the amount claimed, viz., Rs. 8,74,365, is not in dispute. The Tribunal took the view that as such expenditure was not permissible as a deduction under s. 35B(1)(b), sub-cl. (iii), of the Act, as it stood, while it was on the statute book, that expenditure cannot be brought under s. 35B(1)(b), sub-cl. (viii). That finding of the Tribunal ignored the fact that section 35B(1)(b)(iii) of the Act remained on the statute book only up to 1st April, 1981, and even while it was on the statute book, the operation was confined to the period prior to 1st April, 1978. Sec. 35B(1)(b)(viii) of the Act has remained in the same form unaltered. The assessment year with which we are concerned being 1980-81, sub-cl. (iii) was not operative in this assessment year. The sub-clause which could have been invoked, and has been invoked is sub-cl. (viii) of the Act. Sub-cl. (viii) has to be construed on its own terms. That sub-clause in express terms provides as under : “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.”
3. The expenditure which the assessee claimed to have incurred is in connection with the execution of the contract. The sub-clause refers to 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. The expenditure incurred being part of the costs of execution of the contract for supply of goods outside India, there is no reason why those costs cannot be regarded as amounts admissible under sub-cl. (viii) of the Act for the purpose of grant of weighted deduction. A similar view has been taken by the Punjab and Haryana High Court in the case of CIT vs. Roadmaster Industries of India (P) Ltd. (1993) 112 CTR (P&H) 351 : (1993) 202 ITR 968 (P&H). We answer the second question in favour of the assessee and against the Revenue.
[Citation : 259 ITR 236]