Court denies deductions for various expenses under Section 35B, remits some matters for further verification.

The court held that the assessee failed to provide sufficient evidence to support deductions claimed for various expenses under Section 35B. Establishment expenses, general expenses, advertisement expenses, and service charges were deemed ineligible for deduction. The court remitted matters regarding participation and exhibition charges, subscription to foreign magazines, and expenditure on obtaining photostat copies of documents back to the Tribunal for further verification. Service charges paid to a representative in India were also not eligible for deduction under Section 35B.

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Issues Involved:
1. Establishment expenses
2. Travelling expenses and expenses on postage, telex, telegram, telephone, printing, and stationery
3. General expenses
4. Advertisement expenses
5. Participation and exhibition charges
6. Subscription to foreign magazines
7. Expenditure on obtaining photostat copies of various documents
8. Service charges

Issue-wise Detailed Analysis:

1. Establishment Expenses:
The assessee claimed deductions for establishment expenses, including salary to stenographers and assistants, under Section 35B. The Assessing Officer disallowed these expenses due to lack of evidence showing that the stenographer's duties were related to export activities. The Commissioner allowed 50% of the expenses, which the Tribunal increased to 60%. The court held that the assessee failed to provide sufficient evidence to prove that the expenses fell under any sub-clauses of Section 35B(1)(b). Thus, the expenses were not eligible for deduction.

2. Travelling Expenses and Expenses on Postage, Telex, Telegram, Telephone, Printing, and Stationery:
For the assessment year 1977-78, the assessee claimed deductions for travelling expenses and other communication-related expenses. The Commissioner allowed 50% of these expenses, which the Tribunal increased to 60%. For the next assessment year, the Tribunal allowed 33% of the total expenses. The court noted that the Assessing Officer had already allowed deductions for specific foreign-related expenses, and there was no justification for further deductions on other communication-related expenses. Thus, these expenses were not eligible for additional deductions.

3. General Expenses:
The assessee claimed deductions for general expenses, including the purchase of greeting cards, books on export procedures, and obtaining photostat copies of documents. The Assessing Officer disallowed these expenses, but the Commissioner allowed 50%, which the Tribunal increased to 60%. The court held that these expenses did not fall under any sub-clauses of Section 35B(1)(b) and were not eligible for deduction.

4. Advertisement:
The assessee claimed deductions for advertisement expenses, including the purchase of blocks, diaries, and trade publicity. The Assessing Officer disallowed these expenses, but the Commissioner allowed 50%, which the Tribunal increased to 60%. The court held that these expenses were not related to advertisement abroad and did not qualify for deduction under Section 35B.

5. Participation and Exhibition Charges:
The assessee claimed deductions for participation and exhibition charges. The Assessing Officer disallowed these expenses, but the Commissioner and Tribunal allowed them. The court remitted the matter back to the Tribunal to verify if the expenses were related to participation in exhibitions outside India, which would qualify for deduction under sub-clause (i) of Section 35B(1)(b).

6. Subscription to Foreign Magazines:
The assessee claimed deductions for subscriptions to various magazines and publications. The Assessing Officer disallowed these expenses due to lack of evidence. The court remitted the matter back to the Tribunal to verify if the subscriptions were for foreign magazines to obtain information regarding markets outside India, which would qualify for deduction under sub-clause (ii) of Section 35B(1)(b).

7. Expenditure on Obtaining Photostat Copies of Various Documents:
The assessee claimed deductions for expenses on obtaining photostat copies of documents. The Assessing Officer disallowed these expenses, but the Commissioner and Tribunal allowed them. The court remitted the matter back to the Tribunal to verify if the expenses were incurred for obtaining information regarding markets outside India, which would qualify for deduction under sub-clause (ii) of Section 35B(1)(b).

8. Service Charges:
The assessee claimed deductions for service charges paid to a representative in Bombay. The Assessing Officer disallowed these expenses, but the Commissioner and Tribunal allowed them. The court held that service charges paid to a representative in India do not qualify for deduction under Section 35B, as none of the sub-clauses of Section 35B(1)(b) are attracted.

Conclusion:
Both references (Income-tax References Nos. 60 and 131 of 1982) were disposed of in the above terms, with certain matters remitted back to the Tribunal for further examination.

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