1984 (12) TMI 144 - AT - Income Tax

Assessee denied deduction for non-export expenses, case remanded for further review.

METTUR BEARDSELL LTD. Versus INCOME TAX OFFICER.

The Tribunal held that the assessee was not entitled to weighted deduction on the claimed items of expenditure for the assessment years 1974-75 and ... - Issues Involved:1. Market development allowance under Section 35B of the Income Tax Act, 1961.2. Weighted deduction on specific items of expenditure.Detailed Analysis:1. Market Development Allowance under Section 35B of the Income Tax Act, 1961:The primary issue in these appeals concerns the market development allowance under Section 35B of the Income Tax Act, 1961. The assessee claimed weighted deduction for various expenditures incurred during the assessment years 1974-75 and 1975-76. The appeals were consolidated for convenience as they arose from a common order.The assessee's appeals were partly allowed by the CIT(A), who followed the principles laid down by the Special Bench of the Tribunal in the case of J. Hemchand & Co. However, the Department contended that the decision of the Madras High Court in CIT vs. Southern Sea Foods (P) Ltd. should prevail over the Tribunal's decision.2. Weighted Deduction on Specific Items of Expenditure:Assessment Year 1974-75:- General Expenses: The assessee claimed a weighted deduction for general expenses amounting to Rs. 8,425. The Tribunal held that the assessee did not provide sufficient evidence to prove that these expenses were incurred wholly and exclusively for export purposes. Therefore, the claim for weighted deduction was rejected.- Repairs to Building: The assessee claimed Rs. 9,675 for repairs to the building. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Fire & General Insurance: The assessee claimed Rs. 5,711 for fire and general insurance. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Bungalow Maintenance: The assessee claimed Rs. 5,813 for bungalow maintenance. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- LTA, Rent, Bungalow, and Passage: The assessee claimed Rs. 12,000 for LTA, rent, bungalow, and passage. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Passage and Leave Travel Allowance: The assessee claimed Rs. 1,840 for passage and leave travel allowance. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Godown Rent: The assessee claimed Rs. 11,950 for godown rent. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Garage Rent: The assessee claimed Rs. 41,234 for garage rent. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.Assessment Year 1975-76:- General Expenses: The assessee claimed Rs. 17,697 for general expenses. The Tribunal held that the assessee did not provide sufficient evidence to prove that these expenses were incurred wholly and exclusively for export purposes. Therefore, the claim for weighted deduction was rejected.- Repairs to Buildings: The assessee claimed Rs. 342 for repairs to buildings. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Fire & General Insurance: The assessee claimed Rs. 10,786 for fire and general insurance. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Bank Charges: The assessee claimed Rs. 1,432 for bank charges. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Professional Charges: The assessee claimed Rs. 700 for professional charges. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Repairs to Machinery: The assessee claimed Rs. 4,115 for repairs to machinery. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Repairs to Furniture: The assessee claimed Rs. 12,793 for repairs to furniture. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Rates and Taxes: The assessee claimed Rs. 722 for rates and taxes. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.- Marine Insurance: The assessee claimed Rs. 8,106 for marine insurance. The Tribunal held that these expenses were incurred within India and did not have a direct nexus with the export business. Hence, the claim for weighted deduction was rejected.Separate Judgment:The Accountant Member disagreed with the Judicial Member's view that the decision of the Special Bench of the Tribunal in J. Hemchand & Co. was not good law in view of the Madras High Court's decision in Southern Sea Foods (P) Ltd. The Accountant Member held that the principles laid down by the Special Bench were not contrary to the High Court's decision and directed the CIT(A) to re-examine certain items of expenditure.The Third Member agreed with the Accountant Member, holding that the decision of the Special Bench in J. Hemchand & Co. was not contrary to the Madras High Court's decision in Southern Sea Foods (P) Ltd. and was still good law. The case was sent back to the CIT(A) for re-examination of certain items of expenditure.Conclusion:The Tribunal held that the assessee was not entitled to weighted deduction on the claimed items of expenditure for the assessment years 1974-75 and 1975-76 as they were incurred within India and not wholly and exclusively for export purposes. The decision of the Special Bench in J. Hemchand & Co. was upheld as good law, and the case was remanded to the CIT(A) for re-examination of certain items of expenditure.