1984 (10) TMI 27 - HC - Income Tax

Court rules trade discount not deductible under Income-tax Act; Tribunal's decision deemed erroneous.

The court held that trade discount does not qualify as an expenditure under section 35B of the Income-tax Act. The Appellate Assistant Commissioner should ... Export Market Development Allowance, Mistake Apparent From Record, Rectification Issues involved: The judgment involves the interpretation of provisions u/s 154 and u/s 147(b) of the Income-tax Act, 1961 regarding rectification of orders and validity of reassessment.Interpretation of u/s 154: The case involved a dispute regarding the rectification of an order under section 154 of the Income-tax Act, 1961. The Income-tax Officer sought rectification of an order disallowing the benefit of section 35B claimed by the assessee. The Appellate Assistant Commissioner dismissed the petition for rectification, stating that the materials provided were insufficient to invoke his jurisdiction under section 154.Interpretation of u/s 147(b): The reassessment initiated under section 147(b) of the Income-tax Act, 1961 was also challenged in the case. The Appellate Assistant Commissioner set aside the order of reassessment passed by the Income-tax Officer. The counsel for the Revenue argued that trade discount is not an expenditure within the meaning of section 35B, and therefore, the Appellate Assistant Commissioner should have rectified his order.The court held that trade discount does not qualify as an expenditure under section 35B of the Income-tax Act. The Appellate Assistant Commissioner should have rectified the mistake in allowing the claim under section 35B. The Appellate Tribunal's decision in confirming the order was deemed erroneous. The court cited the decision of the Supreme Court in M. K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd. [1958] 34 ITR 143 in support of this view.In conclusion, the court answered question No. 1 in the negative, in favor of the Department and against the assessee. Due to this answer, the court declined to answer question No. 2. The judgment was delivered by Judge K. P. Radhakrishna Menon and T. Kochu Thommen of the Kerala High Court.