Export markets development allowance denied where foreign indenting services were rendered in India

Weighted deduction under section 35B(1)(b) was not available for expenditure on foreign indenting business where the relevant services were rendered in India. The governing principle was that export markets development allowance cannot be claimed for commission or similar outgoings incurred in India merely because the activity has an overseas business element. On that reasoning, the assessee's claim failed and the allowance was disallowed.

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Issues: Whether export markets development allowance under section 35B(1)(b) of the Income-tax Act, 1961 was admissible for expenditure incurred on foreign indenting business when the relevant services were rendered in India.

Analysis: The issue was governed by the settled principle that weighted deduction under section 35B is not available where the expenditure relates to commission or similar outgoings incurred in India for sales or business activity outside India. Applying that principle, the allowance claimed on the foreign indenting business expenditure could not be sustained merely because the business had an overseas element, since the services connected with it were rendered in India.

Conclusion: The assessee was not entitled to the allowance claimed under section 35B(1)(b); the question of law was answered in favour of the Revenue.

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