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Union Carbide India Ltd. v. Commissioner Of Income-Tax

Calcutta High Court

Jul 14, 1986

Judgment

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Factual and Procedural Background

The opinion records two separate applications made under section 256(1) of the Income-tax Act, 1961 by (a) the assessee (Union Carbide (India) Ltd.) and (b) the Revenue, by which the Tribunal referred multiple questions of law to this Court.

The assessee's reference asked (inter alia) whether excess payments made on repayment of dollar loans (attributable to exchange-rate fluctuations) were capital expenditure or allowable as revenue expenditure or business loss, and queried distinctions between expenditure on obtaining a loan and on repayment.

The Revenue's reference raised a separate set of questions including whether house rent allowance and reimbursement of medical expenses paid to employees were perquisites under section 40A(5)(a)(ii), whether director commissions should be excluded for the purpose of disallowance under section 40(c), whether the Deep Sea Fishing Division qualified as an "industrial undertaking" under section 80J, whether export agency inspection fees were eligible for weighted deduction under section 35B, whether capital work-in-progress should be included in capital employed for section 80J relief, and whether a deduction under section 80J should be pro rata where a division worked only part of the year.

The Tribunal supplied a consolidated statement of case. The Court considered the referred questions, applied existing precedent, answered several questions either for the Revenue or for the assessee, and declined to answer certain questions where unnecessary or not pressed.

Legal Issues Presented

Whether excess payments arising from exchange-rate fluctuations on repayment of dollar loans used to purchase machinery abroad are capital expenditure or allowable as revenue expenditure (assessee's reference).
Whether such excess payments should alternatively be allowed as revenue expense because they were incurred as an integral part of profit-earning and did not create a permanent asset (assessee's reference).
Whether such excess payments should alternatively be treated as a business loss under section 28(i) (assessee's reference).
Whether a distinction is permissible between expenditure incurred in obtaining a loan and expenditure incurred at the time of repayment for deductibility purposes (assessee's reference).
Whether expenditure for repaying foreign-currency loans is allowable as revenue expenditure only if the foreign loan was utilised to acquire current assets (assessee's reference).
Whether house rent allowance and reimbursement of medical expenses paid to employees are perquisites within the meaning of section 40A(5)(a)(ii) (Revenue's reference).
Whether commission paid to directors should be excluded in computing the disallowance under section 40(c) (Revenue's reference), and related procedural question about entertaining that ground of appeal.
Whether the Deep Sea Fishing Division is an "industrial undertaking" for the purposes of section 80J (Revenue's reference).
Whether expenses on account of export agency inspection fee are covered by section 35B (and thus entitled to weighted deduction) (Revenue's reference).
Whether capital work-in-progress in the agricultural pesticide division should be included in the computation of capital employed for relief under section 80J (Revenue's reference).
Whether the deduction under section 80J should be allowed for the entire period or on a pro rata basis where the agricultural pesticide division operated only part of the year (Revenue's reference).

Arguments of the Parties

Assessee's Arguments (as recorded)

The assessee claimed weighted deduction under section 35B in respect of export inspection agency fees paid for export of frozen shrimps, arguing that the certificates obtained constituted technical information necessary for export and saleability abroad and therefore fell within clause (vi) of section 35B(1)(b).
The assessee produced a Gazette of India notification (dated March 6, 1965) showing that exports of fish and products required such certificates; the assessee argued that without them it could not export the goods.
The Tribunal and Commissioner (Appeals) accepted that the inspection fees were incurred to obtain certificates that amounted to technical information for promotion of sales abroad and were directly related to export, justifying weighted deduction under section 35B(1)(b)(vi).

Revenue's Arguments (as recorded)

The Revenue relied on the Madras High Court decision in V.D. Swami & Co. Pvt. Ltd. v. CIT, which construed section 35B(1)(b)(iii) and held that weighted deduction under that sub-clause was available only for expenditure incurred outside India; the Revenue urged that the same reasoning required expenses (claimed under section 35B(1)(b)(vi) in this case) to have been incurred outside India.
At the hearing the learned advocate for the Revenue did not press certain questions (specifically questions (2) and (3) of the Revenue's reference), and the Court recorded that those were not pressed.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT v. Bharat General & Textile Industries Ltd., [1986] 157 ITR 158	Cited as covering the assessee's question on exchange-rate excess payments (repayment of dollar loan) concerning capital vs revenue character.	The Court followed this decision and, in accordance with it, answered the assessee's question No. 1 in the negative — i.e., in favour of the Revenue.
Bestobell (India) Ltd. v. Commissioner Of Income-Tax, West Bengal-V, [1979] 117 ITR 789	Cited as an earlier decision covering the same issue as the assessee's question on exchange-rate excess payments.	The Court treated this decision as covering the controversy and followed it in answering the assessee's question No. 1 in the negative (in favour of the Revenue).
CIT v. Kanan Devan Hills Produce Company Ltd., [1977] 119 ITR 431	Listed among authorities covering question No.1 referred by the Revenue (issues in the Revenue's reference).	The Court relied on this decision (with others listed) to answer the Revenue's question No.1 in the affirmative and in favour of the assessee.
Indian Leaf Tobacco Development Co. Ltd. v. CIT, [1982] 137 ITR 827	Listed as authority relevant to the Revenue's question No.1.	Followed as part of the group of decisions leading the Court to answer that Revenue's question No.1 in the affirmative (in favour of the assessee).
CIT v. Alkali and Chemical Corpn. of India Ltd., [1986] 158 ITR 58	Listed as authority relevant to the Revenue's question No.1.	Applied as part of the precedent group that supported answering the Revenue's question No.1 in the affirmative (in favour of the assessee).
CTT v. General Marketing & Manufacturing Co., [1987] 165 ITR 566 (Cal)	Listed as one of the decisions covering the Revenue's question No.1.	Relied upon along with other authorities to answer the Revenue's question No.1 in the affirmative for the assessee.
Commissioner Of Income-Tax v. Union Carbide India Ltd., [1987] 165 ITR 550	Previous Bench judgment of the same Court concerning a related question; cited for question No.4 referred by the Revenue.	The Court followed that earlier Bench judgment and answered the Revenue's question No.4 in the affirmative and in favour of the assessee.
Commissioner Of Income-Tax v. Union Carbide India Ltd., [1987] 165 ITR 546	Referenced as an identical question previously answered (in relation to question No.6 of the Revenue).	Used along with Indian Oxygen Ltd. decision to answer Revenue's question No.6 in the affirmative and in favour of the assessee.
Commissioner Of Income-Tax v. Indian Oxygen Ltd., [1978] 113 ITR 109	Cited as covering the controversy in question No.6 referred by the Revenue (capital employed computation under section 80J).	Followed by the Court and cited as authority in answering Revenue's question No.6 in the affirmative and in favour of the assessee.
Commissioner Of Income-Tax v. Oyster Packagers (P.) Ltd., Calcutta, [1985] 152 ITR 471	Cited as covering the controversy in question No.7 referred by the Revenue (deduction under section 80J where division worked part-year).	The Court followed this decision and answered Revenue's question No.7 in the affirmative and in favour of the assessee.
V.D. Swami & Co. Pvt. Ltd. v. CIT, [1984] 146 ITR 425 (Madras)	Madras High Court holding: in construing section 35B(1)(b)(iii), weighted deduction under that sub-clause is available only for expenses incurred outside India.	The Court considered this decision but distinguished it: V.D. Swami dealt with sub-clause (iii) and the Court held that extending its observation to other sub-clauses would be obiter. The Court did not accept the Revenue's attempt to apply that reasoning to clause (vi).
CIT v. Eldee Wire Products Ltd., [1978] 114 ITR 485 (Bom)	The Bombay High Court construed section 35B and observed that where Parliament intended to exclude expenditure incurred in India it did so expressly (e.g., sub-clause (iii)); where no such exclusion is present, expenditure incurred in India may be eligible provided other conditions of the section are satisfied.	The Court relied on this reasoning to reject the Revenue's contention that all sub-clauses require expenditure to be incurred outside India; it supported the Tribunal's allowance under clause (vi) for fees incurred in India.
CIT v. Jay Engineering Works, [1984] 149 ITR 297 (Delhi)	The Delhi High Court construed various sub-clauses of section 35B(1)(b) and held there is nothing to indicate that expenses must be incurred only outside India to be eligible for weighted deduction under those sub-clauses.	The Court cited this decision in support of the proposition that sub-clauses other than (iii) do not require that expenditure be incurred outside India.
Bharat General & Textile Industries Ltd. v. CIT, [1985] 153 ITR 747	This Court construed section 35B(1)(b)(iii) and held that certain charges (clearing and forwarding at Indian ports, carriage to destination outside India, insurance in transit) were not allowable for weighted deduction under sub-clause (iii) because they were incurred in India.	The Court cited this decision to distinguish sub-clause (iii)'s special requirement and to maintain that it does not control the construction of other sub-clauses such as (vi); the present case's allowance under (vi) was not disturbed.

Court's Reasoning and Analysis

The Court approached the consolidated references by identifying which referred questions were covered by existing precedent and then answering or declining to answer accordingly. The analysis can be summarized stepwise as follows:

Assessee's reference, Question No.1 (exchange-rate excess payments on repayment of dollar loans): the Court found that this controversy was covered by earlier decisions of this Court (CIT v. Bharat General & Textile Industries Ltd. and Bestobell (India) Ltd.). Following those precedents, the Court answered the question in the negative and in favour of the Revenue. Because of that result, the Court declined to answer the remaining questions (Nos. 2–5) referred by the assessee as unnecessary.
Revenue's reference — Question No.1 (whether house rent allowance and reimbursement of medical expenses are perquisites under section 40A(5)(a)(ii)): the Court considered several precedents (including Kanan Devan, Indian Leaf Tobacco, Alkali and Chemical, and CTT v. General Marketing) and, following them, answered this question in the affirmative and in favour of the assessee (i.e., the Tribunal was justified in holding these were not perquisites for the purpose indicated).
Revenue's Questions No.2 and No.3 (relating to section 40(c) and procedural admissibility): the Court recorded that the learned advocate for the Revenue did not press these grounds and therefore the Court declined to answer them.
Revenue's Question No.4 (distinction between expenditure in obtaining a loan and expenditure at repayment): the Court relied on a prior decision of the same Bench in a related Union Carbide reference and answered the question in the affirmative and in favour of the assessee.
Revenue's Question No.5 (whether export agency inspection fees are covered by section 35B and entitled to weighted deduction): the Court set out the material facts — the assessee had paid export agency inspection fees to obtain certificates required by foreign buyers and by an Indian Gazette notification; Commissioner (Appeals) and the Tribunal accepted that, without the certificates, export was not possible and that the certificates supplied technical information for promotion of sales outside India. The Revenue relied on V.D. Swami (Madras) which construed s.35B(1)(b)(iii) as requiring expenditure to be incurred outside India. The Court distinguished V.D. Swami as being concerned with sub-clause (iii) and held that its observation could not be extended to other sub-clauses except as obiter. The Court observed that other High Court decisions (Eldee Wire, Jay Engineering) had held that sub-clauses other than (iii) do not require expenditure to be incurred outside India. The Tribunal's conclusion that the fees fell within clause (vi) of section 35B(1)(b) (furnishing to a person outside India samples or technical information for promotion of sale) was not challenged on relevant findings; the Court declined to interfere and answered the question in the affirmative and in favour of the assessee.
Revenue's Question No.6 (inclusion of capital work-in-progress in capital employed for section 80J): the Court noted the matter was covered by Commissioner of Income-tax v. Indian Oxygen Ltd. and an identical earlier Union Carbide reference; following those authorities, the Court answered the question in the affirmative and in favour of the assessee.
Revenue's Question No.7 (whether section 80J deduction should be pro rata where a division worked only part of the year): the Court followed Commissioner Of Income-Tax v. Oyster Packagers and answered the question in the affirmative and in favour of the assessee.
Costs: On the question concerning section 35B (export inspection fees) the Court recorded that, on the facts and circumstances, there would be no order as to costs.
Concurrence: The opinion records that Justice Monjula Bose agreed with the conclusions.

Holding and Implications

The Court resolved the referred questions by applying and following existing authority; its answers and immediate consequences are summarized below.

Core holdings (summary of answers):

Assessee's Question No.1 (exchange-rate excess payments): Answered in the negative — in favour of the Revenue. The Court held that the controversy was covered by prior decisions (CIT v. Bharat General & Textile Industries Ltd.; Bestobell) and that the Tribunal's view that such excess payments were revenue rather than capital was not sustained. As a result, the assessee's challenge on that point failed.
Assessee's Questions Nos.2–5: The Court declined to answer these questions in view of its answer to Question No.1.
Revenue's Question No.1 (house rent allowance and medical reimbursements): Answered in the affirmative — in favour of the assessee. The Court, following several authorities, held that the Tribunal was justified in holding these amounts were not perquisites within the meaning of section 40A(5)(a)(ii).
Revenue's Questions Nos.2–3: Not pressed by the Revenue; the Court declined to answer them.
Revenue's Question No.4 (distinction between obtaining a loan and repaying it): Answered in the affirmative — in favour of the assessee. The Court followed a prior Bench decision involving the same assessee.
Revenue's Question No.5 (export agency inspection fees and section 35B): Answered in the affirmative — in favour of the assessee. The Court upheld the Tribunal's finding that the fees were incurred to obtain certificates amounting to technical information furnished to persons outside India for promotion of sales (section 35B(1)(b)(vi)), and allowed weighted deduction accordingly.
Revenue's Question No.6 (capital work-in-progress in capital employed for section 80J): Answered in the affirmative — in favour of the assessee. The Court followed Indian Oxygen Ltd. and an identical earlier reference and allowed inclusion.
Revenue's Question No.7 (section 80J deduction for part-year operation): Answered in the affirmative — in favour of the assessee. The Court followed Oyster Packagers and allowed the relief accordingly (i.e., not strictly pro rata as contended by Revenue).

Implications: The direct effects are (a) the assessee's claim that exchange-rate excess payments were revenue expenses was rejected (favouring the Revenue on that point), and (b) on multiple points raised by the Revenue (including characterisation of employee payments, treatment under section 35B for export inspection fees, inclusion of capital work-in-progress for section 80J, and computation of section 80J relief) the Court answered in favour of the assessee following existing authorities. The Court primarily applied and followed precedent; it did not purport to announce any new legal principle beyond its application of cited authorities.

Show all summary ...

Dipak Kumar Sen, J.:— On an application of the assessee under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following questions, as questions of law arising out of its order, for the opinion of this court:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the excess payments of Rs. 6,34,484 and Rs. 42,284 made on account of fluctuations in the exchange rate of dollars, at the time of repayment of the dollar loan raised from EXIM Bank and ICICI, respectively, for purchasing machinery from abroad was a capital expenditure and not an allowable revenue expenditure?

2. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that the excess payments on account of fluctuations in the exchange rate of dollars for repayment of dollar loan should have been allowed as revenue expense since the payment under consideration had been incurred as an integral part of the profit-earning process and did not bring into existence any asset or right of a permanent character?

3. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held alternatively that the excess payments of Rs. 6,34,484 and Rs. 42,284 was a business loss under section 28(i)?

4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in drawing a distinction between the expenditure incurred in obtaining a loan and the expenditure incurred at the time of repayment of the loan for determining the deductibility of the expenses incurred in relation to either activity?

5. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the expenditure incurred for repaying the loan in foreign currency would be allowable as revenue expenditure only if the loan in foreign currency was utilised for acquiring current assets?”

2. On another application of the Revenue also under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following questions, as questions of law arising out of its order, for the opinion of this court:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the house rent allowance and reimbursement of medical expenses paid by the assessee-company to its employees are not perquisites within the meaning of section 40A(5)(a)(ii) of the Income-tax Act, 1961?

(2) Whether, on the facts and in the circumstances of the case and on a correct interpretation of section 40(c) of the Income-tax Act, the Tribunal was justified in holding that the commission paid to the directors should be excluded for the purpose of working out the disallowance under section 40(c) of the Income-tax Act?

(3) Whether, on the facts and in the circumstances of the case and having regard to the fact that the assessee-company itself included commission paid to its directors for the purpose of disallowance under section 40(c) of the Income-tax Act, the Tribunal was justified in upholding the decision of the Commissioner of Income-tax (Appeals) in entertaining the ground of appeal of the assessee claiming exclusion of commission for working out the disallowance under section 40(c) of the Income-tax Act?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the Deep Sea Fishing Division of the assessee was an ‘industrial undertaking’ within the meaning of sections 80J of the Income-tax Act, 1961?

(5) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expenses on account of export agency inspection fee are covered by section 35B of the Income-tax Act and in that view, such expenses are entitled to weighted deduction?

(6) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the value of capital work-in-progress in its industrial undertaking, agricultural pesticide division, should be included in the computation of capital employed for the purpose of relief under section 80J of the Income-tax Act?

(7) Whether, on the facts and in the circumstances of the case and having regard to the fact that the agricultural pesticide division of the assessee worked for four months only during the assessment year 1978-79, the Tribunal was justified in holding that the deduction under section 80J of the Income-tax Act should be allowed for the entire period instead of on a pro rata basis?”

3. The Tribunal has sent up a consolidated statement of case in respect of all the questions. The controversy raised in question No. 1 referred at the instance of the assessee is covered by a decision of this court in CIT v. Bharat General & Textile Industries Ltd., [1986] 157 ITR 158 as also an earlier decision of this court in Bestobell (India) Ltd. v. Commissioner Of Income-Tax, West Bengal-V, [1979] 117 ITR 789. Following the said decisions, we answer the question in the negative and in favour of the Revenue. In view of the answer to question No. 1, we decline to answer questions Nos. 2, 3, 4 and 5 referred at the instance of the assessee.

4. The controversy raised in question No. 1 referred at the instance of the Revenue is covered by the following decisions of this court:

(a) CIT v. Kanan Devan Hills Produce Company Ltd., [1977] 119 ITR 431,

(b) Indian Leaf Tobacco Development Co. Ltd. v. CIT, [1982] 137 ITR 827,

(d) CTT v. General Marketing & Manufacturing Co., [1987] 165 ITR 566 (Cal) (infra).

5. Following the said decisions, we answer the question in the affirmative and in favour of the assessee.

6. The learned advocate for the Revenue did not press for answers to questions Nos. (2) and (3) referred at the instance of the Revenue. Therefore, we decline to answer the same.

7. The controversy raised in question No. (4) referred at the instance of the Revenue is covered by a judgment dated July 9, 1986, delivered by this Bench in the case of the same assessee in Income-tax Reference No. 91 of 1983 (Commissioner Of Income-Tax v. Union Carbide India Ltd., [1987] 165 ITR 550 (supra)). Following the said judgment, we answer the question in the affirmative and in favour of the assessee.

8. The controversy raised in question No. (6) referred at the instance of the Revenue is covered by a decision of this court in Commissioner Of Income-Tax v. Indian Oxygen Ltd., [1978] 113 ITR 109. In the case of the same assessee in Income-tax Reference No. 379 of 1981 (Commissioner Of Income-Tax v. Union Carbide India Ltd., [1987] 165 ITR 546), an identical question was answered on June 3, 1986. Following the said decisions, we answer the question in the affirmative and in favour of the assessee.

9. The controversy raised in question No. (7) referred at the instance of the Revenue is covered by a decision of this court in Commissioner Of Income-Tax v. Oyster Packagers (P.) Ltd., Calcutta, [1985] 152 ITR 471. Following the said decision, we answer the question in the affirmative and in favour of the assessee.

10. The material facts and proceedings pertaining to question No. (5) referred at the instance of the Revenue are as follows:

11. Union Carbide (India) Ltd., the assessee, was assessed to income-tax in the assessment year 1978-79, the accounting year ending on December 25, 1977. In its assessment, the assessee claimed weighted deduction under section 35B of the Income-tax Act, 1961, in respect of export inspection agency fees paid on account of export of frozen shrimps. The Income-tax Officer disallowed the same.

12. Being aggrieved, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). It was contended before the Commissioner (Appeals) that fees in respect of the export agency inspection were paid for the purpose of obtaining a certificate from the agency as to the quality, of the goods. It was contended that the certificate amounted to technical information on the quality of the products sought to be exported and the production of such certificate was an essential condition for the saleability of the goods in a foreign country. It was contended that the assessee was entitled to weighted deduction on account of export markets development allowance in respect of the said expenditure. The Commissioner (Appeals) accepted the contentions of the assessee and allowed weighted deduction as claimed holding that the expenditure was wholly and exclusively incurred for certification of the quality of the goods which was an essential condition of export.

13. Being aggrieved, the Revenue went up on further appeal before the Income-tax Appellate Tribunal. The Tribunal accepted the case of the assessee that unless the said certificate's were obtained from the export agency inspection authorities, it would not be possible for the assessee to export its goods. The assessee also produced before the Tribunal a Gazette of India notification dated March 6, 1965, which prohibited export of fish and its products unless accompanied by such certificate. The Tribunal also accepted the contentions of the assessee that the certificate furnished technical information for promotion of sales of the assessee's goods outside India and that the expenditure to obtain such certificate was incurred directly for export of goods overseas. The contentions of the Revenue to the contrary were rejected.

14. At the hearing before us, the learned advocate for the Revenue drew our attention to the decision of the Madras High Court in V.D Swami & Co. Pvt. Ltd. v. CIT, [1984] 146 ITR 425. In that case, a Division Bench of the Madras High Court considered section 35B(1)(b)(iii) of the Income-tax Act, 1961, and held that weighted deduction under the said clause of the section would be available only in respect of expenses incurred outside India and not in respect of any expenditure incurred in India if the distribution of the goods was outside India. The court observed further as follows (at page 428):

“A look at the other sub-clauses of s. 35B(1)(b), such for instance as sub-clauses (i), (iv), (vi), (vii), (viii) and (ix), also shows the insistence of Parliament that the weighted deduction cannot be exigible unless the expenditure under the different heads are incurred ‘outside India’, a phrase which occurs again and again in the various sub-clauses”.

15. Inspired by the said observation, the learned advocate contended that in the instant case, where weighted deduction was being claimed under the said section 35B(1)(b)(vi), the assessee had to establish that the expenses had been incurred outside India. The inspection agency fees admittedly having been paid in India, the assessee was not entitled to claim weighted deduction.

16. We are unable to accept the contentions of the Revenue. In V.D Swami & Co. (P.) Ltd.'s case, [1984] 146 ITR 425, the Madras High Court considered the claim for weighted deduction made under section 35B(1)(b)(iii) and not under other clauses in the said section. The said observation of the Madras High Court has to be considered in the context of the controversy before it. With respect we hold that if the said observation is intended to cover other clauses of the said section, then it will be in the nature of an obiter.

17. Other High Courts have considered section 35B and have categorically held that apart from section 35(1)(b)(iii), the expenditure referred to in the other clauses of the section would be eligible for weighted deduction even if they were incurred in India. We note some of the said decisions:

(a) CIT v. Eldee Wire Products Ltd., [1978] 114 ITR 485 (Bom). In this case, a Division Bench of the Bombay High Court construing section 35B of the Income-tax Act, 1961, observed that where the Legislature desired to exclude expenditure incurred in India for the purpose of giving the benefit of weighted deduction, it expressly did so by specifically mentioning such exclusion in the sub-clause concerned, e.g, sub-clause (iii). The court observed further that where this was not done, the expenditure incurred by the assessee either outside India or in India would be eligible for weighted deduction but must fulfil the other conditions laid down in the said section.

(b) CIT v. Jay Engineering Works, [1984] 149 ITR 297 (Delhi). In this case, the Delhi High Court construing sub-clauses (i), (ii), (v), (vi), (vii), (viii) and (ix) of section 35B(1)(b) held that there were nothing in the said sub-clauses to indicate that in order to claim weighted deduction, the expenses must be incurred only outside India.

18. In Bharat General & Textile Industries Ltd. v. CIT, [1985] 153 ITR 747, this court construed section 35B(1)(b)(iii) and, following the decisions of other High Courts, held that clearing and forwarding charges paid by the assessee in Indian ports on goods exported, expenditure incurred on the carriage of goods to their destination outside India or on the insurance of goods while in transit were not allowable for weighted deduction under the said sub-clause (iii) as they were incurred in India.

19. In the instant case, the facts found by the Commissioner (Appeals) and the Income-tax Appellate Tribunal on which weighted deduction on the export agency inspection fees has been allowed have not been challenged by the Revenue. The conclusion of the Tribunal that such export agency inspection fees paid by the assessee for the purpose of obtaining a certificate, a necessary requirement for the export of the goods, amounted to expenditure incurred for furnishing to a person outside India technical information for the promotion of sale of such goods within the meaning of clause (vi) of section 35B(1)(b). The material part of the section is as follows i

“(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 clause (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 clause (a) is that incurred wholly and exclusively on:—…

(vi) furnishing to a person outside India samples or technical information for the promotion of the sale of such goods, services or facilities.”

20. For the reasons as above, we are not inclined to interfere with the decision of the Tribunal and we answer the question in the affirmative and in favour of the assessee. On the facts and circumstances, there will be no order as to costs.

Monjula Bose, J.:— I agree.