Bank entitled to deduction under s.35B for foreign branch and international division maintenance expenses; lower authorities must follow precedent

Bombay HC held the petitioner-bank entitled to claim deduction under s.35B for expenses on maintenance of foreign branches and international division, finding its activities comparable to another bank previously allowed the benefit. The Court ruled the Assessing Officer was bound by the Tribunal's judgment and erred in distinguishing it on untenable grounds, emphasizing hierarchical judicial discipline and the duty of lower authorities to follow higher fora. Petition allowed and relief granted to the petitioner-bank.

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Issues involved:
The judgment involves a petition against a revisional order u/s 264 of the Income-tax Act, 1961, regarding the entitlement of a bank to deduction u/s 35B for expenses incurred outside India and on its international division in India.

Facts:
The petitioner bank, a nationalized bank with foreign branches, filed a return for the assessment year 1975-76 without claiming weighted deduction u/s 35B. The assessment was completed without such claim. Subsequently, the bank sought revision for the deduction, which was rejected by the first respondent.

Subsequent developments:
During the pendency of assessment, the Tribunal allowed similar deductions for other years. The Tribunal's decisions were upheld, making the bank eligible for the deduction. The bank contended it was entitled to relief u/s 35B for expenses incurred on foreign branches and international division in India.

Rival submissions:
The bank argued it met the criteria for deduction u/s 35B, while the Revenue argued against it based on the nature of the bank's operations. The Revenue contended that the foreign branches were not maintained for promoting banking services outside India.

Statutory provisions:
Section 35B of the Act allows for deductions for expenditure incurred wholly and exclusively on maintenance outside India for the promotion of sales outside India of goods, services, or facilities.

Findings:
The court held that the bank was entitled to claim relief u/s 35B as it rendered services to overseas and Indian customers. The Tribunal's judgment was binding on the Assessing Officer, who should have followed it. The court quashed the impugned order and allowed the petition.

In conclusion, the court ruled in favor of the petitioner bank, allowing the claim for deduction u/s 35B and emphasizing the importance of following Tribunal judgments.

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