Weighted deduction and free-supply cost deduction followed binding precedent, leaving both tax issues in the assessee's favour.

Section 35C weighted deduction was governed by an earlier binding ruling, so the Tribunal's contrary interpretation was not sustained and the expenditure remained eligible for the claimed deduction. The same earlier decision also covered the question whether the cost price of milk powder and soya flour received free of charge could be deducted in computing total income, and that issue was likewise resolved in favour of the assessee. The reference therefore followed the prior interpretation on both questions, with the assessee entitled to the claimed relief in line with the earlier decision.

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Issues: (i) Whether the Tribunal was right in its interpretation and application of section 35C of the Income-tax Act, 1961 and in holding that the expenditure incurred was not fully eligible for weighted deduction. (ii) Whether the cost price of milk powder and soya flour received free of charge was deductible in computing total income.

Issue (i): Whether the Tribunal was right in its interpretation and application of section 35C of the Income-tax Act, 1961 and in holding that the expenditure incurred was not fully eligible for weighted deduction.

Analysis: The controversy on the first three questions was governed by an earlier decision of the Court which had already resolved the scope of section 35C and the entitlement to weighted deduction on the relevant expenditure. The earlier ruling concluded the issue in favour of the assessee.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Issue (ii): Whether the cost price of milk powder and soya flour received free of charge was deductible in computing total income.

Analysis: The controversy raised by this question was also covered by an earlier decision of the Court, which had decided the point in favour of the assessee.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: All referred questions were resolved in favour of the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: Where a binding earlier decision has concluded the controversy, the same interpretation governs the referred questions and the assessee is entitled to the claimed deduction or relief in accordance with that ruling.

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