JUDGMENT
J.N. Bhatt, J.
1. The assessee is a private limited company carrying on business in the manufacture and sale of art silk cloth. It also deals with purchase and sale of yarn as well as doing job work.
2. In the course of assessment proceedings for the assessment years 1976-77 and 1977-78, the assessee had, inter alia, claimed export markets development allowance or weighed deduction in respect of the following items for both the assessment years under section 35B of the Income-tax Act, 1961 (“the Act for short) :
1976-77 1977-78
Rs. Rs.
1. Packing and forwarding expenses 1,26,319 2,39,723
2. Insurance 6,166 22,763
3. Audit fees 2,500 2,500
4. Postage, telegram and telephone 22,205 40,566
5. Travelling, etc. 83,953 30,566
6. Printing and stationery 7,384 17,288
7. Advertisement 23,311 29,065
8. Salaries, wages and bonus 59,246 48,918
9. Miscellaneous expenses 54,475 60,686
3. The Income-tax Officer disallowed the aforesaid items of expenditure claimed by the assessee, holding that the same did not qualify for export markets development allowance or, in other words, weighted deduction as provided in section 35B of the Act.
4. Being aggrieved by the said assessment orders, the assessee preferred two appeals before the Commissioner of Income-tax (Appeals) (“the Commissioner” for short) at Baroda. At the time of hearing of the appeals, a statement signed by the assessee was filed before the Commissioner wherein it was stated that the Bombay office of the assessee was wholly and exclusively run for export business. It was also contended that the expenses incurred by the Bombay office should be allowed as weighted deduction under section 35B of the Act. Accordingly, the assessee had also re-submitted a claim for weighted deduction restricted to the expenses incurred by the Bombay office only. Thus, the assessee had revised its claim for weighted deduction in the appeals before the Commissioner.
5. As both these appeals involved common grounds and contentions, it would be expedient and convenient to consider the revised claims in respect of the aforesaid items made by the assessee and decided by the Commissioner after hearing the parties, in the following tabulated form with a view to avoid repetition of narration of identical principles and similar facts :
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Sl. No. Items Assessment Assessment
year 1976-77 year 1977-78
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Revised Allowed Revised Allowed
weighted Commis- weighted Commissioner
deduction sioner claimed
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Rs. Rs. Rs. Rs.
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1. Packing and
forwarding expenses 126,000 Nil 2,39,728 Nil
2. Insurance 6,166 Nil 22,763 Nil
3. Audit fees 2,500 Nil 2,500 Nil
4. Postage, telegram
and telephone 22,205 11,102 40,946 20,473
5. Travelling, etc. 83,953 57,357 30,566 Nil
6. Printing and
stationery 7,384 3,692 17,298 8,648
7. Advertisement 23,311 Nil 29,065 Nil
8. Salaries, wages
and bonus 59,246 44,435 48,918 36,689
9. Miscellaneous
expenses 54,475 27,237 60,686 15,044
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6. As can be seen from the aforesaid Table, the appeals of the assessee were partly allowed. The assessment orders under appeal were modified by allowing 50 per cent. of the amount of expenditure under the head of items No. 4 – Postage, telegram and telephone, No. 6 – Printing and stationery, No. 9 – Miscellaneous expenses for both the relevant assessment years. The Commissioner also allowed 75 per cent. of the amount of expenditure under the head “Item No. 5 – Travelling expenses, etc.”, for the assessment year 1976-77 and 75 per cent. of the amount of expenditure under the head “Item No. 8 – Salaries, wages and bonus” for both the assessment years, by way of weighted deduction under section 35B of the Act.
7. The assessee, being dissatisfied by the decision of the Commissioner in both the appeals, carried the matters further in second appeal before the Income-tax Appellate Tribunal (“the Tribunal” for short) by filling two appeals. As both these appeals involved common contentions, they were disposed by a composite order by the Tribunal. The Tribunal confirmed the decision of the Commissioner in both the appeals, holding that the authority below had rightly followed the ratio of the decision of the Special Bench of the Tribunal in the case of J. Hemchand and Co. v. ITO (IT 50 T 150).
8. That is how the appeals before the Tribunal came to be dismissed, on August 26, 1982, by a common order.
9. By this reference under section 256(1) of the Act, the Tribunal has referred to us for our opinion the following question :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee is not entitled to weighted deduction under section 35B of the Income-tax Act, 1961, in respect of the items set out in paragraph 2 (of the statement of case ?”
10. The appeals filed by the assessee were partly allowed by the Commissioner and he granted relief in respect of expenditure on item No. 4 – Postage, telegram and telephone, No. 5 – Travelling, etc. No. 6 – Printing and stationery, No. 8 – Salaries, wages and bonus, and No. 9 – Miscellaneous expenses, partly. The Commissioner rejected the claim of the assessee in respect of the remaining items of expenditure. The conclusions of the Commissioner were confirmed by the Tribunal. In our opinion, the Tribunal, therefore, rightly, upheld the decisions of the Commissioner (Appeals). The items of expenditure which were disallowed do not qualify for weighted deduction under section 35B(1) of the Act. In our opinion, therefore, the assessee is not entitled to claim weighted deduction which were rightly disallowed under section 35B(1) of the Act.
11. No distinguishing features are successfully pointed out on behalf of the assessee to depart from the view taken by the Tribunal. Learned counsel, Mr. Mehta, for the assess has, fairly and rightly, submitted that the authorities below have applied the decision of the Special bench of the Tribunal in the case of J. Hemchand and Co., and the has not been able to show any material which would warrant interference with the impugned decision.
12. We fully agree with the view taken by the Tribunal and confirm its conclusions. We, therefore, hold that the assessee is not entitled to claim weighted deduction in respect of the aforesaid items of expenditure disallowed by the authorities below.
13. On facts and in the circumstances of the case, we are of the opinion that the Tribunal was justified in law in holding that the assessee is not entitled to weighted deduction under section 35B(1) of the Act in respect of the following items :
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Sl. No. Item Assessment year Assessment year
1976-77 1977-78
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1. Packing and forwarding exp. 1,26,000 2,39,728
2. Insurance 6,166 22,763
3. Audit fees 2,500 2,500
4. Postage, telegram and telephone 11,102 20,473
5. Travelling, etc. 26,596 30,566
6. Printing and stationery 3,692 8,648
7. Advertisement 23,311 29,065
8. Salaries, wages and bonus 14,811 12,229
9. Miscellaneous charges 27,237 45,645
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13. In the result, the question referred to us for our opinion and as modified by us, in respect of the above items in the forgoing paragraphs is answered in the affirmative and against the assessee.
14. Reference answered accordingly with no order as to costs.