No weighted deduction for export freight, insurance, and related charges u/s35B(1)(b)(iii); specific exclusion prevails

HC held that no weighted deduction under s. 35B(1)(b) is allowable on expenditure incurred on freight and insurance of goods exported, whether incurred in India or outside India, in view of the specific exclusion in sub-clause (iii). The assessee cannot invoke sub-clause (viii) to claim such deduction, as the specific provision overrides the general one, applying the maxims generalia specialibus non derogant and generalibus specialia derogant and the principle of harmonious construction. HC further held that export inspection charges, brokerage, bank charges and clearing charges incurred in India are also not eligible, as they do not constitute services performed outside India. The reference was answered in favour of Revenue.

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Issues Involved:
The judgment involves the interpretation of provisions u/s 35B(1)(iii) and u/s 35B(1)(viii) of the Income-tax Act, 1961 regarding the allowability of weighted deduction on certain expenditures incurred by the assessee in India in connection with the carriage of goods to their destination outside India.

Interpretation of u/s 35B(1)(iii):
The court analyzed the specific prohibition in u/s 35B(1)(iii) which disallows weighted deduction on expenditure incurred on the carriage of goods to their destination outside India and on insurance of such goods while in transit. The court referred to previous decisions and emphasized that this clause prevails over the general provision in u/s 35B(1)(viii). The court held that no weighted deduction is allowable on expenditure on freight, insurance, export inspection charges, brokerage, bank charges, and clearing charges as they were incurred in India.

Interpretation of u/s 35B(1)(viii):
The court considered whether weighted deduction could be claimed under u/s 35B(1)(viii) for the mentioned expenditures despite the specific prohibition in u/s 35B(1)(iii). The court concluded that u/s 35B(1)(iii) must be given precedence as it deals with specific conditions and restrictions on the allowability of weighted deduction. The court rejected the argument that each sub-clause should be read independently and held that the exclusion in u/s 35B(1)(iii) prevails over the general provisions in other sub-clauses of clause (b).

Final Decision:
The court answered the question referred in the affirmative, against the assessee and in favor of the Revenue. The court did not allow weighted deduction on the mentioned expenditures under u/s 35B(1)(iii) and clarified that u/s 35B(1)(viii) did not apply as the expenditures did not relate to the performance of services outside India in connection with the execution of any contract for the supply of goods outside India. No costs were awarded under the circumstances of the case.

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