1993 (9) TMI 94 - HC - Income Tax

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 ... Entitlement to weighted deduction u/s 35B - expenditures incurred in India in connection with the carriage of goods to their destination outside India - deduction on freight and insurance - principle of harmonious construction - maxims : Generalia specialibus non derogant and generalibus specialia derogant. - HELD THAT:- From reading of the Sub-clauses (iii) and (viii) of clause (b) of section 35B(1), it is clear that sub clause (iii) specifically deals with expenditure incurred by the assessee on the carriage of goods to their destination outside India and on insurance of such goods while in transit. It contains a specific prohibition on the allowability of weighted deduction on such expenditure. This clause came up for the consideration of this court in M. H. Daryani's case [1993 (2) TMI 81 - BOMBAY HIGH COURT] - no weighted deduction is allowable at all on expenditure on freight and insurance whether incurred in India or outside India. In the instant case, it is also not allowable on expenditure incurred on account of (i) export inspection charges, (ii) brokerage, (iii) bank charges, and (iv) clearing charges as these were incurred in India. The only question that survives for consideration is whether, in such a situation, weighted deduction can be claimed by the assessee on expenditure on freight and insurance, etc., under sub-clause (viii). In other words, whether despite the specific prohibition in sub-clause (iii) on allowance of weighted deduction on freight and insurance, it can be allowed by resort to sub-clause (viii). The answer, in our opinion, has to be in the negative. It is a well-settled principle of interpretation that a statute must be read as a whole and every provision must be construed with reference to the context and other clauses in the statute so as to make a consistent enactment of the whole statute. It is equally well-settled that the sub-sections or sub-clauses must be read as parts of an integral whole and as being interdependent and an attempt should be made in construing them to reconcile them if it is reasonably possible to do so, and to avoid repugnancy. If there are two conflicting provisions in the same section or clause, the courts should find out which of the two provisions is more general and which is more specific and construe the more general one as to exclude the more specific. The principle is expressed in the maxims : Generalia specialibus non derogant and generalibus specialia derogant. If a special provision is made on a certain subject-matter, that matter is excluded from the general provision. We are, therefore, of the clear opinion that allowability of weighted deduction on expenditure falling under sub-clause (iii) will have to be determined with reference to the conditions and restrictions specified therein and not with reference to any other sub-clause which deals with expenditure of general nature. In our opinion, the specific exclusion made in sub-clause (iii) will prevail over the general provisions contained in the other sub-clauses of clause (b). Such an interpretation is also in accord with the principle of harmonious construction. Even on facts, the various items of expenditure incurred by the assessee in the instant case do not fall under clause (viii) because none of them has been incurred on performance of any service outside India in connection with or incidental to the contract for supply of goods outside India. We answer the question referred to us in the affirmative, i.e., against the assessee and in favour of the Revenue. 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.