1986 (5) TMI 67 - AT - Income Tax

Commissioner's orders upheld by Tribunal for assessment years, rejecting assessee's appeals.

The Tribunal upheld the Commissioner's orders in all three assessment years, rejecting the assessee's appeals. The Commissioner's jurisdiction under ... Export Market Development Allowance Issues Involved:1. Jurisdiction under Section 263 of the Income-tax Act, 1961.2. Eligibility of various expenses for weighted deduction under Section 35B.3. Expenditure on salary.4. Expenditure on commission.5. Expenditure on rent.6. Expenditure on electricity and water charges.7. Expenditure on car expenses.8. Expenditure on export expenses.Detailed Analysis:Jurisdiction under Section 263:The Commissioner initiated proceedings under Section 263, asserting that the Income Tax Officer's (ITO) orders granting deductions under Section 35B were erroneous and prejudicial to the revenue's interests. The Tribunal found that the Commissioner acted independently and not based on an audit report, thus upholding the jurisdiction under Section 263.Eligibility of Various Expenses for Weighted Deduction under Section 35B:The Tribunal examined the eligibility of various expenses claimed by the assessee for weighted deduction under Section 35B. The Commissioner had reduced the deductions granted by the ITO, which was upheld by the Tribunal.Expenditure on Salary:The ITO had allowed weighted deduction on 80% of the salary expenses, which the Commissioner reduced. The Tribunal upheld the Commissioner's decision to allow weighted deduction on only 75% of the salary expenses related to export activities, excluding those related to manufacturing.Expenditure on Commission:The ITO had allowed 100% weighted deduction on commission expenses. The Commissioner disallowed this, citing that the commission was paid for procuring orders, which is ineligible for weighted deduction as per the Madras High Court decision in CIT v. Southern Sea Foods (P.) Ltd. The Tribunal upheld this disallowance, noting that the commission was actually for inspection fees, which do not qualify under Section 35B.Expenditure on Rent:The ITO allowed weighted deduction on 75% of the rent expenses. The Commissioner reduced this to 30%, stating that most of the rented space was used for manufacturing. The Tribunal upheld this reduction, agreeing with the Commissioner's detailed examination.Expenditure on Electricity and Water Charges:The ITO allowed 80% weighted deduction on electricity and water charges. The Commissioner reduced this to 30%, noting that most of the electricity was used in manufacturing. The Tribunal upheld this reduction.Expenditure on Car Expenses:The ITO allowed 50% weighted deduction on car expenses. The Commissioner reduced this to 25%, which the Tribunal upheld, noting no infirmity in the Commissioner's decision.Expenditure on Export Expenses:The ITO allowed 100% weighted deduction on export expenses. The Commissioner reduced this to 50%, finding that many expenses did not fall under Section 35B(1)(b). The Tribunal upheld this reduction, agreeing with the Commissioner's detailed examination.Conclusion:The Tribunal upheld the Commissioner's orders in all three assessment years, rejecting the assessee's appeals. The Tribunal found that the Commissioner had correctly assumed jurisdiction under Section 263 and had appropriately reduced the weighted deductions granted by the ITO.