Weighted deduction claims under section 35B: commission to Indian agents allowed, export sales expense remitted for reconsideration.

Commission paid to Indian agents in India was treated as eligible for weighted deduction under section 35B(1)(b) where the governing CBDT circular supported that treatment, and the court applied its earlier decision to answer that point in the assessee's favour. Sales expenditure on export sales incurred in India was not finally determined by the court; instead, the matter was remitted to the Tribunal to reconsider the claim in the light of the CBDT circular dated 28 December 1981 and the Special Bench decision in J. Hemchand and Co. The reference was thus partly favourable to the assessee, with the remaining issue left for fresh adjudication.

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Issues: (i) Whether the assessee was entitled to weighted deduction under section 35B(1)(b) of the Income-tax Act, 1961 in respect of commission payments to Indian agents in India. (ii) Whether the assessee was entitled to weighted deduction under section 35B(1)(b) of the Income-tax Act, 1961 in respect of sales expenditure on export sales incurred in India.

Issue (i): Whether the assessee was entitled to weighted deduction under section 35B(1)(b) of the Income-tax Act, 1961 in respect of commission payments to Indian agents in India.

Analysis: The question was covered by the earlier decision of the Court holding that such commission paid to agents in India qualified for weighted deduction, regard being had to the circular of the Central Board of Direct Taxes referred to in that decision.

Conclusion: The question was answered in the affirmative and in favour of the assessee.

Issue (ii): Whether the assessee was entitled to weighted deduction under section 35B(1)(b) of the Income-tax Act, 1961 in respect of sales expenditure on export sales incurred in India.

Analysis: The question had been considered earlier in relation to similar claims, and the Court followed the course adopted in the earlier decision directing the Tribunal to adjudicate the matter in the light of the Special Bench decision in J. Hemchand and Co. to the extent adopted or incorporated by the circular of the Central Board of Direct Taxes dated 28 December 1981.

Conclusion: The Court declined to answer the question and directed the Income-tax Appellate Tribunal to restore the appeal and decide the issue afresh in accordance with the applicable circular and the Special Bench decision.

Final Conclusion: The reference was answered partly in favour of the assessee, while the remaining issue was sent back to the Tribunal for fresh adjudication.

Ratio Decidendi: Commission payments to Indian agents may qualify for weighted deduction where the governing circular supports such treatment, while unresolved claims on export-related sales expenditure may require reconsideration by the Tribunal in light of the applicable circular and binding precedent.

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