1987 (6) TMI 77 - AT - Income Tax

Tribunal affirms weighted deduction under section 35B for export activities

The Tribunal upheld the Commissioner of Income-tax (Appeals) decision, allowing the claim of weighted deduction under section 35B for expenses related to ... Carrying On Business, Development Allowance, Expenditure Incurred Issues:1. Claim of weighted deduction under section 35B for expenses related to activities enumerated in section 35B.2. Interpretation of 'Export Markets Development Allowance' under section 35B.3. Criteria for grant of weighted deduction under section 35B.4. Applicability of clause (1A) of section 35B for assessment years 1977-78 and 1978-79.Analysis:1. The appeals before the Appellate Tribunal ITAT BOMBAY-D involved the claim of weighted deduction under section 35B for expenses related to activities specified in the provision. The Commissioner of Income-tax (Appeals) allowed the claim for both assessment years, directing the Income-tax Officer to calculate the relief accordingly. The revenue challenged this decision on the grounds that the business of the assessee was not that of an exporter, thus ineligible for the deduction under section 35B.2. The interpretation of 'Export Markets Development Allowance' under section 35B was a crucial point of contention. The revenue argued that without actual exports, there could be no claim for export markets development allowance or weighted deduction under section 35B. However, the assessee's counsel cited precedents where similar businesses were granted the deduction despite no actual exports, emphasizing the purpose of encouraging export market development through various activities.3. The Tribunal referred to the Supreme Court's decision in K. P. Varghese v. ITO, highlighting that the marginal note of a section cannot dictate its interpretation. The Tribunal emphasized that the purpose of section 35B is to promote the development of export markets, which can be achieved through various activities beyond just actual exports. The key criterion for the grant of weighted deduction under section 35B is the expenses incurred on specific activities listed in the provision.4. Regarding the applicability of clause (1A) of section 35B, the Tribunal noted its relevance for expenditure incurred after a certain date, which was not applicable to the assessment years in question. Considering the facts, precedents, and the purpose of section 35B, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) and dismissed the revenue's appeal, affirming the entitlement of the assessee to the deduction under section 35B.In conclusion, the Tribunal's decision favored the assessee, emphasizing the broader scope of activities that qualify for weighted deduction under section 35B, beyond just actual exports, to encourage the development of export markets.