High Court allows warehouse charges deduction for 1980-81, denies retrospective rule effect on sub-clause benefit.

The High Court allowed the weighted deduction on warehouse charges under section 35B(1)(b)(iii) for the assessment year 1980-81 if incurred before goods' sale. However, it ruled that rule 6AA, introduced later, cannot have retrospective effect, denying the benefit of sub-clause (ix) of section 35B(1)(b) for assessments completed pre-rule introduction.

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Issues Involved:
The judgment involves the interpretation of provisions u/s 35B(1)(b)(iii) and u/s 35B(1)(b)(ix) of the Income-tax Act, 1961, and the applicability of rule 6AA of the Income-tax Rules, 1962, for the assessment year 1980-81.

Interpretation of Section 35B(1)(b)(iii):
The Commissioner of Income-tax challenged the weighted deduction allowed on warehouse charges under section 35B(1)(b)(iii) for the assessment year 1980-81. The High Court held that if warehouse charges were incurred for storing goods before their sale, they qualify as expenses for distribution and supply outside India, making them eligible for weighted deduction under this section.

Applicability of Rule 6AA:
The Tribunal determined the applicability of rule 6AA introduced on August 1, 1981, for the assessment year 1980-81. The High Court ruled that rule 6AA cannot have retrospective effect and, therefore, the benefit of sub-clause (ix) of section 35B(1)(b) is not available for assessments completed before the introduction of the rule.

Decision and Conclusion:
The High Court answered the first question affirmatively, allowing the weighted deduction on warehousing expenses u/s 35B(1)(b)(iii) for the assessee. However, the second question regarding the applicability of rule 6AA was answered negatively, denying the benefit of sub-clause (ix) of section 35B(1)(b) for the same assessment year. The judgment was delivered by Judges Bhagabati Prasad Banerjee and Ajit Kumar Sengupta of the High Court of Calcutta.

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