Court rules director's travel expenses from abroad to India not eligible for export markets development allowance

The High Court of Bombay ruled against the assessee in a case concerning the interpretation of section 35B of the Income-tax Act. The court held that expenses incurred on traveling from abroad to India did not qualify for export markets development allowance under the relevant clause of section 35B. The court emphasized that the clause pertained to expenses for traveling outside India for sales promotion, excluding expenses for traveling from abroad to India. Consequently, the assessee was not entitled to the claimed deduction for the director's travel expenses to India.

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Issues: Interpretation of section 35B of the Income-tax Act regarding eligibility for export markets development allowance based on expenditure incurred on traveling from abroad to India.

In this case, the High Court of Bombay was tasked with interpreting section 35B of the Income-tax Act, specifically regarding the eligibility of an assessee for export markets development allowance based on the expenditure incurred on traveling from abroad to India. The assessee, a private limited company engaged in manufacturing and exporting various products, claimed weighted deduction under section 35B for the traveling expenses of its director, who also held a position in a collaborating company in the USA. The controversy arose when the Income-tax Officer disallowed the deduction, stating that the expenses for traveling from a foreign country to India cannot be allowed under the relevant clause of section 35B.

Upon appeal, the Commissioner of Income-tax (Appeals) allowed the deduction, reasoning that the director's visit to India was in connection with export promotion to foreign countries. The Tribunal upheld this decision, leading to a reference to the High Court by the Revenue. The High Court analyzed section 35B, emphasizing that the clause in question pertains to expenses incurred on traveling outside India for the promotion of sales outside India, including traveling outward from and returning to India. The Court concluded that the expenditure on the director's travel from the USA to India did not fall within the scope of the clause, as it focused on traveling from India outward. Therefore, the Tribunal's decision to allow the deduction was deemed unjustified.

In its judgment, the High Court answered the referred question in the negative, favoring the Revenue. The Court highlighted that the clause in section 35B specifically addresses traveling outside India for sales promotion, excluding expenses for traveling from abroad to India. As a result, the assessee was not entitled to the weighted deduction claimed for the director's travel expenses to India. The judgment concluded without any order as to costs.

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