JUDGMENT
R.K. Abichandani, J.
1. The Tribunal, Ahmedabad Bench “B” has referred for the opinion of this Court under s. 256(1) of the IT Act, 1961, the following questions :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law that interest of Rs. 1,59,255 paid to the Dena Bank was not qualified for deduction under s. 35B of the Act ?”
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law that transportation charges upto Bombay of Rs. 42,820 was not entitled to weighted deduction under s. 35B of the IT Act ?”
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law that freight charges of Rs. 1,71,230 was not entitled to weighted deduction under s. 35B of the Act ?”
2. The relevant assessment year is 1978-79. The assessee-firm carries on business at Unjha. The assessee firm claimed weighted deduction on interest of Rs. 1,59,255 paid to the Dena Bank. The ITO disallowed the claim of the assessee and in appeal, CIT(A) confirmed the view of the ITO. On appeal before the Tribunal, the Tribunal set aside the order of the CIT(A) on this point and held that the assessee is not entitled for the weighted deduction of Rs. 1,59,255 on account of interest paid to bank. It would appear from the material on record that the said amount of interest was not directly connected with the exports. The said amount was therefore, not qualified for the deduction under s. 35B of the Act, as rightly held by the Tribunal. As held by this Court in CIT vs. Jay Industries (1992) 196 ITR 313 (Guj) expenditure that the assessee had incurred in India for supply of goods outside India would not qualify for weighted deduction as such expenditure is specifically excluded under sub-clause (iii) of s. 35B(1)(b) of the IT Act. In that case assessee had taken loan for manufacture of goods which were to be exported and it was held that expenditure was specifically excluded under sub-clause (iii) of s. 35B(1)(b). That being the position, the assessee was not entitled to claim weighted deduction on interest and question No. 1 is, therefore, answered in the affirmative in favour of the Revenue and against the assessee.
3. The assessee had claimed weighted deduction for transportation charges to the tune of Rs. 42,820 and on account of freight charges to the tune of Rs. 1,71,230. Its claim was disallowed by the ITO and the CIT(A) confirmed the view of the ITO. The Tribunal upheld the decision of the CIT(A). It would appear that the transportation charges as well as freight charges would not be covered by any of the clauses of s. 35B. The question is concluded by the decision of this Court in Isabgul Export Corporation vs. CIT (1993) 200 ITR 797 (Guj) wherein it was held that the relevant clause of s. 35B(1)(b)(iii), inter alia clearly provided that the expenditure incurred in India or expenditure incurred on the carriage of goods exported to a destination or on the insurance of such goods while in transit would not qualify for weighted deduction. In Shri Ambica Mills Ltd. vs. CIT (1992) 198 ITR 99 (Guj), where the amount was paid towards freight in India, it was held that in view of the clear provision of s. 35B(1)(b)(iii), weighted deduction under s. 35B could not be claimed in respect of such amount. In this view of the matter, question Nos. 2 and 3 referred to us are answered in the affirmative in favour of the Revenue and against the assessee.
4. The Reference stands disposed of accordingly with no order as to costs.