Ajit K. Sengupta, J.:— In this reference under section 256(1) of the Income-tax Act, 1961, for the assessment year 1984–85, the following question has been raised before this court:

“Whether, on the facts and in the circumstances of the case, when according to the finding of the Commissioner in his order, the commission of Rs. 2,50,587 was sales commission simpliciter, the Tribunal was justified in law in holding that relief under section 35B(1)(b)(iv) of the Income-tax Act, 1961, is allowable on the same and thereby vacating that portion of the order of the Commissioner?”

2. Shortly stated the facts are that originally the Assessing Officer allowed deduction under section 35B(1)(b)(iv) of the Act on the commission of Rs. 2,50,587 paid to the foreign agents. Subsequently, the said assessment was set aside by the Commissioner of Income-tax, West Bengal-1, Calcutta, vide his order under section 263 of the Act, since it was viewed by him that the commission paid to foreign agents did not qualify for the deduction under section 35B as no branch office had been maintained by the assessee-company outside India.

3. On appeal by the assessee-company against the order of the Commissioner of Income-tax under section 263, the Tribunal had decided the issue in favour of the assessee-company according to the ratio of the Income-tax Appellate Tribunal, Allahabad Bench, in the case of Kothari Carpets, [1984] 9 ITD 357, which had been followed by the Income-tax Appellate Tribunal, Calcutta, in several cases.

4. Before us the contentions raised before the Tribunal have been reiterated.

5. We have heard learned counsel appearing for the parties.

6. The agreement dated February 16, 1981, by and between the assessee and the foreign agents, inter alia, provided as follows:

“You will procure and refer to us for our acceptance orders for the products in accordance with such instructions and directions as we may from time to time give to you. You will have no right to accept on our behalf orders procured by you or make contracts for the sale of the, products on our behalf. You shall have no right to accept on our behalf any payment by any purchaser of the products except in cases where we may authorise you in writing. You will promote the sale of the products in the territory and render us full assistance and co-operation in this regard and maintain constant contacts with the purchasers or potential purchasers thereof.

In consideration of your services hereunder, we shall pay you a commission of five per cent, on the f.o.b value of the products under orders procured by you and accepted and executed by us.

This agreement is subject to the approval of the Reserve Bank of India and of other authorities in India if so required.”

7. The said agreement was approved by the Reserve Bank of India which would be evident from the registration certificate dated October 3, 1981, for remittance of commission on exports issued by the Reserve Bank of India. It is not in dispute that the assessee paid commission to the foreign agents who acted on behalf of the assessee for promotion of the sale of products outside India.

8. The question is whether such deduction will come within the pur-view of section 35B(1)(b)(iv) of the Act. The contention of Mr. Moitra is that this would be governed by section 35B(1)(b)(iii).

9. This contention, however, cannot be accepted inasmuch as clause (iii) was deleted with effect from April 1, 1981.

10. Our attention has been drawn to the decision in the case of Commissioner Of Income-Tax v. Chloride India Ltd., [1992] 193 ITR 355 (Cal). There this court observed as follows (at page 357):

“The contention raised by the Revenue before the Tribunal was that the expenditure incurred on payment of commission was not allowable and, in this connection, reliance was placed on a decision of the Madras High Court in CIT v. Southern Sea Foods (P.) Ltd., [1983] 140 ITR 855. In that case, the commission was paid to an Indian company. The Madras High Court considered the question whether the commission paid to any Indian company fell within the purview of sub-clause (iv). It was held that this sub-clause refers to expenditure incurred wholly or exclusively on the maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods, services or facilities which the assessee deals in. The Madras High Court was of the view that the expenditure incurred on payment of commission to the Indian company did not fall under sub-clause (iv).

The facts in this case are, however, different. The Tribunal found in this case that the expenditure was incurred by the assessee-company on maintenance of the agency outside India for promotion of sale outside India of goods which the assessee ‘deals in’. It will appear from the details of the expenditure submitted before the Tribunal that the payments were made to three foreign agents in the U.A.E, England and Australia.

Mr. Bagchi, appearing for the Revenue, has fairly drawn our attention to the decision of the Kerala High Court in Commissioner Of Income-Tax v. Pooppally Foods, [1986] 161 ITR 729. In that case, the facts found by the Tribunal were that the payment was made to an agent outside India and that it was in the nature of commission. There, the Kerala High Court held that the commission paid to an agent in a foreign country for promotion of export trade would attract any one of the sub-clauses (ii), (iii), (iv) and (viii) of clause (b) of section 35B(1) of the Act. In our view, on the facts of this case, the expenditure, having been made by way of commission to agents in foreign countries for promotion of the business, would fall within the purview of sub-clause (iv) of section 35B(1)(b).”

11. Our attention has been drawn to the decision of the Karnataka High Court in the case of Chief Commissioner Of Income-Tax v. Mysore Sales International Ltd., [1992] 195 ITR 457. In that case, the assessee who was an agent to effect sales of sandalwood oil appointed sub-agents abroad on commission for the purpose of effecting sales under an agreement entered into between the assessee and the sub-agents. The assessee claimed deduction under section 35B(1)(b)(iv) of the Income-tax Act, 1961, of the commission paid to the sub-agents. The Tribunal allowed the claim for deduction on the ground that the agreement between the assessee and the sub-agents was for promotion of sales abroad.

12. There the Karnataka High Court distinguished the decision of the Kerala High Court in Commissioner Of Income-Tax v. Pooppally Foods, [1986] 161 ITR 729 and held as follows (at page 460):

“The sub-clause (iv) permits a deduction in respect of expenditure incurred wholly and exclusively on maintenance outside India of a branch, office or agency. The word ‘agency’ occurs along with the other two words ‘branch’ and ‘office’. Therefore, the meaning attributable to agency will have to be something which has some flavour resembling that of a branch or office. This apart, the principal, i.e, the assessee, has to maintain such agency. The expenditure that can fall within this clause is an expenditure incurred for the maintenance of such agency. The word ‘maintenance’ cannot be equated with the concept of payments made depending upon the actual work turned out. It indicates that, irrespective of the work turned out, the agency was maintained for its upkeep or preservation or sustenance; this alone could be termed as maintenance of an agency. In the instant case, the agents were paid, depending upon the work turned out. If the agent fails to procure any sales, the assessee need not pay anything to the agent. Therefore, the agent will have to maintain itself in the relevant territory. The assessee was not responsible for the maintenance of the agent in any manner. No term of agreement provides for the payment of any amount by the assessee to the foreign agent for the latter's maintenance in the said territory. It is also not possible to infer that the commission payable to the agent comprehends within itself the amounts referable to the possible expenditure for the maintenance of such agent.

The above approach of ours finds full support in the opening sentence of clause (b) of section 35B(1). The expenditure which qualifies for the weighted deduction should be one that was incurred ‘wholly and exclusively’ on the various activities referred to in sub-clauses (i) to (ix) of clause (b). If the expenditure is relatable to anything else, certainly this provision cannot be attracted. Further, under sub-clause (iv), the expenditure incurred for the maintenance of the agency should be for the promotion of the sales outside India, Therefore, the maintenance of the agency for the sale promotional purposes alone is covered by the relevant words of sub-clause (iv) and such expenditure should be entirely incurred for the said purpose. The commission paid in the instant case certainly includes a remuneration for the agent for procuring a particular sale and it is not a commission for the promotion of the sales as such by building up a market for sandalwood oil generally.”

13. Our attention has also been drawn to the decision of the Kerala High Court in the case of Srivilas Cashew Co. v. Commissioner Of Income-Tax., [1992] 196 ITR 887.

14. In that case the Income-tax Officer rejected the claim of the assessee on the ground that the assessee did not maintain a branch office or agency of its own outside India, but the sales were made through agents who were carrying on the business of agency independently and for their own benefit and that the payment of commission made to such agents could not be construed as an expenditure incurred by the assessee for maintaining an agency as contemplated by clause (iv) of section 35B(1)(b).

15. The contention of the Revenue was that the word “agency” takes its colour from the words “branch” and “office” (these words, in the context, can only mean the branch or office of the assessee manned by his servants) used in the section and, therefore, it should be given the same meaning and, if that be so, the relationship between the assessee and the so-called agent shall be that of master and servant.

16. The Kerala High Court observed (at page 889):

“Here, the persons who are doing the agency work are doing agency business for others also. They, therefore, cannot be said to be servants of the assessee and hence, the commission paid to them cannot be said to be an expenditure incurred wholly and exclusively for maintaining an agency outside….

We are not impressed by this argument. The word ‘agency’ used in the section has acquired a clear and definite meaning both under law and in trade. The same meaning shall be attributed to the word in the section and not the meaning suggested by counsel for the Revenue. It is all the more so because the Legislature has deliberately used the disjunctive expression ‘or’ denoting that the meaning of the words ‘branch’, ‘office’ or ‘agency’ cannot be the same. In the decision of the Supreme Court in Lahsh-minarayan Ram Gopal and Son Ltd.'s case, [1954] 25 ITR 449 : AIR 1954 SC 364, the relationship of master and servant and principal and agent were considered in detail and the Supreme Court quoted with approval the statements of law contained in Halsbury's Laws of England:

‘A principal has the right to direct what work the agent has to do, but the master has a further right to direct how the work is to be done.’

The words used in the section only indicate that the claim can be accepted if it is established that the assessee is maintaining, outside India, either a branch or office under his control or an agency understood in common parlance for the promotion of the sale outside India, of his goods, services or facilities.”

17. In our view, it is not necessary that the assessee should maintain an office or branch. The question is whether the assessee appointed an agent for the purpose of promotion of sales. The agreement in this case indicates without any doubt, that the agent was appointed for sales promotion and commission was paid. For such promotion payment has been made to the foreign agent with the approval of the Reserve Bank of India. It cannot be said that section 35B(1)(b)(iv) enjoins that the assessee himself has to maintain an office or agency outside India. He can operate through a foreign agent which has been done in the instant case. Since the assessee has paid commission to the foreign agent outside India for promotion of sales, expenditure for payment of such commission incurred by the assessee must be held to have been incurred for maintaining an agency outside India.

18. With great respect we fail to subscribe to the view taken by the Karnataka High Court in Chief Commissioner Of Income-Tax v. Mysore Sales International Ltd., [1992] 195 ITR 457, that the principle of ejusdem generis should apply in construing the expression “maintenance outside India of a branch, office or agency for the promotion of sales, etc.” and the term “agency” should be interpreted to imply some establishment of like nature as a branch or office. Such interpretation is a contradiction in itself. When a person maintains an agency relation abroad that agency can predicate only to be the establishment of the agent and such agency can never be an establishment of the assessee. The principle of ejusdem generis applies only where the mention of specific items of the same genus is followed by an expression of a residuary nature pertaining to the same genus. For the invocation of the rule, there must be one distinct genus or category. The specific words must apply not to different objects of a widely varying character but to words which convey things or objects of one class or kind. Where this generic unity is absent the rule cannot apply. It is worthwhile to quote Farwell L.J:

“Unless you can find a category, there is no room for the application of the ejusdem generis doctrine and where the words are clearly wide in their meaning they ought not to be qualified on the ground of their association with other words.”

19. Craies on Statute Law, while commenting on the principle, quoted this observation of Farwell L.J and by way of example observed “for instance where a local Act required that theatres and other places of public entertainment should be licensed, the question arose whether a ‘fun-fair’ for which no fee was charged for admission was within the Act. It was held to be so, and that the ejusdem generis rule did not apply to confine the words ‘other places’ to places of the same kind as theatres.”

20. Anyway, there cannot be any inter se association among the companion words if the companion words do not belong to the same genus and are widely different in character and meaning.

21. As we have already observed, agency is an expression of which the content has nothing to do with the preceding words “office or branch”. As a matter of fact, if the assessee has an agency abroad, that agency cannot refer to any independent establishment of the assessee being maintained abroad because agency always connotes the independence of the agent. An agent is a total master of himself. He has only certain obligations to the principal under the contract of agency. Similarly, the principal has also obligations under the same contract. Thus both the principal and the agent act in their own fields and their freedom is delimited to the extent the contract of agency requires. So, while the Legislature requires that an agency shall have to be maintained abroad, the requirement is sufficiently satisfied if there is an agent outside who promotes the sales of the assessee's exports.

22. In that view of the matter, the assessee is entitled to claim deduction under sub-clause (iv) of section 35B(1)(b) of the Act.

23. For the reasons aforesaid, the question in this reference is answered in the affirmative and in favour of the assessee. There will be no order as to costs.

Nure Alam Chowdhury, J.:— I agree.