Weighted deduction under section 35B denied for India-incurred export and shipping charges under the statutory prohibition.

Expenditure incurred in India did not qualify for weighted deduction under section 35B where it fell within the prohibitory scope of section 35B(1)(b)(iii). Applying the earlier decision in the assessee's own case, the Court held that export air freight charges and insurance charges were incurred in India and were therefore outside the deduction. The same reasoning applied to shipping and harbouring charges and export handling charges, as they also related to carriage of goods to a destination outside India or insurance of such goods in transit and were incurred in India. The assessee was accordingly denied weighted deduction on all the items, and the reference was answered in favour of the Revenue.

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Issues: Whether the assessee was entitled to weighted deduction under section 35B of the Income-tax Act, 1961, in respect of shipping and harbouring charges, export air freight charges, insurance charges, and export handling charges.

Analysis: The claim for weighted deduction in respect of export air freight charges and insurance charges was governed by the earlier decision in the assessee's own case, and the same reasoning was applied. The expenditure was held to be incurred in India and, in any event, fell within the restrictive operation of sub-clause (iii) of section 35B(1)(b). The same prohibition was held applicable to shipping and harbouring charges and export handling charges, as those items were also incurred in India and related to carriage of goods to a destination outside India or insurance of such goods while in transit.

Conclusion: The assessee was not entitled to weighted deduction in respect of any of the items in question, and the answer to the referred question was returned in favour of the Revenue and against the assessee.

Ratio Decidendi: Expenditure incurred in India, which falls within the prohibitory sweep of section 35B(1)(b)(iii), does not qualify for weighted deduction under section 35B.

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