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Issues: Whether weighted deduction under section 35B of the Income-tax Act, 1961 was admissible for expenditure incurred in India on sales made in India against foreign currency.
Analysis: The claim for weighted deduction under section 35B was confined to expenditure qualifying under the specified sub-clauses of section 35B(1)(b). The controlling principle, as applied by the Court, was that expenditure eligible under section 35B(1)(b)(iii) must be incurred outside India in connection with the distribution, supply or provision outside India of goods, services or facilities. Expenditure incurred in India in connection with sales effected in India does not satisfy that requirement.
Conclusion: The assessee was not entitled to weighted deduction for the expenditure incurred in India on sales made in India; the question was answered in the negative, in favour of the Revenue and against the assessee.
Final Conclusion: The reference was disposed of by holding that section 35B did not permit weighted deduction on the claimed in-India expenditure connected with domestic sales.
Ratio Decidendi: Weighted deduction under section 35B is allowable only for expenditure falling within the specified sub-clauses and, where the claim is under section 35B(1)(b)(iii), the expenditure must be incurred outside India in connection with activity outside India.
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