ORDER
I.S. Nigam, Accountant Member
1. These two appeals, one relating to the assessment year 1977-78 and another relating to the assessment year 1978-79, filed by the revenue against the consolidated order of the Commissioner of Income-tax (Appeals) I, Bombay, deal with the same issue and are, therefore, for the sake of convenience, disposed of by a common order.
2. The assessee is a registered firm. Among the claims before the Income-tax Officer in the course of the assessment proceedings was the claim of weighted deduction under Section 35B on expenses relating to the activities enumerated in the various Sub-clauses of clause {b) of Sub-section (1) of Section 35B of the Income-tax Act, 1961. This was not accepted by the Income-tax Officer on the ground that the assessee’s business was not that of an exporter and, therefore, the provisions of Section 35B cannot be invoked by the assessee to claim weighted deduction on expenses, which, according to it, were on activities enumerated in the various Sub-clauses of Clause (b) of Sub-section (1) of Section 35B. When the matter went up in appeal, the Commissioner of Income-tax (Appeals) held that the assessee was entitled to the claim of weighted deduction under Section 35B for both the assessment years. He, therefore, directed the Income-tax Officer to work out the relief for both the assessment years in accordance with the provisions of Section 35B. The revenue is aggrieved and has, therefore, come up in the present appeals before us.
3. The learned departmental representative, Shri Prashant, referred to the heading “Export Markets Development Allowance” under which Section 35B appears in order to point out that unless the assessee carries on exports, there is no question of export markets development allowance or any weighted deduction under Section 35B. It was pointed out to us that the business of the assessee-firm was to render services to overseas organisations for developing their interest in buying from India, for which purpose the assessee-firm maintained constant touch with the local: exporters, kept up to date information on local and international price level, bids in various tenders, advice on banking formalities, shipping position, etc. and for these services rendered to the overseas organisations the assessee earned commission in foreign currency. Shri Prashant vehemently argued before us that there was no export at all by the assessee-firm and, therefore, there was no question of any export markets development allowance or any weighted deduction under Section 35B.
4. On the other hand, the assessee’s learned counsel, Shri Sonde, filed before us a copy of the order of the Appellate Tribunal in the case of ITO v. Ampi Agencies (P.) Ltd. [IT Appeal No. 1768 (Bom.) of 1984]. We were taken through the order in order to point out that Ampi Agencies (P.) Ltd. had taken over the business of the assessee-firm and were carrying on the identical business. Shri Sonde pointed out that in this case where the business was identical, the Appellate Tribunal by order dated 24-9-1986 held that the claim of weighted deduction under Section 35B was admissible. He then referred to another order of the Appellate Tribunal in the case of Indian Hotels Co. Ltd. v. ITO [IT Appeal No. 467 (Bom.) of 1975-76] where also even though there was no export at all, the claim of weighted deduction under Section 35B was held to be admissible; He, therefore, vehemently argued before us that the order of the CIT (Appeals) was perfectly justified and did not call for any interference.
5. We have carefully considered the rival submissions. The Kon’ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597 has laid down that the marginal note to a section cannot be referred to for the purpose of constructing the section and can only be relied upon to indicate the drift of the section or what the section is dealing with. Their Lordships further laid down that it cannot control the interpretation of the words of the section, particularly when the language of the section is clear and unambiguous and this being part of the statute, furnishes prima facie only some clues as to the meaning and purpose of the section. Viewed in this context, the head “Export Markets Development Allowance” can only give an indication that this section deals with expenses on activities, which will result in development of export markets and the purpose of this section is to encourage development of export markets. This, however, does not mean that this can only be done by actual exports and in no other manner. Even the activities of the assessee-firm, as already described, the purpose of which was to render services to overseas organisations with a view to developing their interest in buying from India, would also have the effect of development of export markets. Besides, the clear and unambiguous words used in Section 35B nowhere even whisper that the weighted deduction under this section shall only be admissible to those persons who have made actual exports outside India. The criterion for grant of weighted deduction under Section 35B is the expenses incurred wholly and exclusively on activities enumerated in the various Sub-clauses of Clause (b) of Sub-section (1) of Section 35B. It will also be necessary here to point out that Clause (1 A) of Section 35B inserted by the the Finance Act, 1978 relating to expenditure incurred after the 31st day of March, 1978 and omitted by the Finance Act, 1979 with effect from 1-4-1980 will not apply to the assessment years 1977-78 and 1978-79 under consideration in the present appeals for which the relevant previous year ended on Diwali 1976 and Diwali 1977 respectively. Considering all this, looking to the totality of the facts and circumstances and following, with respect, the order of the Appellate Tribunal in the case of Ampi Agencies (P.) Ltd. (supra) where the business was identical to that of the assessee-firm and was in fact taken over from the assessee-firm, we uphold the order of the CIT (Appeals) that the assessee was entitled to the deduction under Section 35B and the Income-tax Officer should work out the relief in accordance with the provisions of the Section.
6. The appeal filed by the revenue fails and is hereby dismissed.