TaxTMI 
TaxTMI 
1988 (6) TMI 73
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....of Rs. 59,794 in respect of salaries of the staff employed in quality control and inspection. The assessee is a manufacturer and exporter of shoe uppers. In the year under consideration the assessee claimed to have paid a sum of Rs. 65,230 as salary to the staff connected with quality control and inspection and claimed weighted deduction on a sum of Rs. 59,794 representing 11 months' salary. The total salary bill of the assessee as reflected in the trading account/profit and loss account was of Rs. 13,72,128.05 debited to the trading account as wages and Rs. 2,11,851 debited as salaries of the profit and loss account. The assessee claimed that the aforesaid amount of Rs. 59,000 was eligible for weighted deduction in terms of sub-clause (c) ....
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....e promotion of the sale outsideIndiaof goods, services or facilities which the assessee deals in or provides. Therefore, reading the initial part of Rule 6AA and sub-clause (c) together, it is clear that the maintenance of a laboratory or other facility for quality control should be directly related to the promotion of the sale of the goods outsideIndia. The result would, therefore, be that ordinary expenditure incurred in the production of goods even though it may relate to quality control or inspection would not be eligible for weighted deduction. It is only that extra expenditure which an exporter may have to incur to ensure that the goods are of the prescribed exportable quality that would be entitled to weighted deduction. This appears....
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....nt such persons only to ensure that the goods answered the description ordered by the foreign buyers (sic). No such material has been placed before the authorities below or before us (sic). We are, therefore, of the view that the expenditure on salary referred to above was not entitled to weighted deduction. The CIT(A)'s order on this point is accordingly confirmed. 5. The next ground (No. 3) raised by the assessee in this appeal is about the rejection of its claim to weighted deduction on 50 per cent of the expenditure in respect of payment of service charges to the State Trading Corporation. The learned CIT(A) has held that this expenditure does not come under any clauses of section 35B(1)(b) or of Rule 6AA. This view does not appear t....
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...., accept this ground of appeal and direct the ITO to allow weighted deduction on 50 per cent of the service charges paid to the State Trading Corporation. 6. The next contention raised in clauses 4, 5 and 6 of the grounds of appeal relates to assessee's claim under section 80HHC of the Income-tax Act, 1961 under which an assessee is entitled to a deduction from its income equivalent to 1 per cent of its export turnover. Export turnover has been defined to mean the sale proceeds of any goods or merchandise exported out ofIndiabut does not include freight insurance attributable to the transport of the goods beyond the customs station. In determining the turnover of the assessee the ITO reduced the turnover by the following amounts : Rs.....
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....is the seller of the goods. Clause 7 of the aforesaid letter relates to the price payable to the assessee. According to this clause the price payable to the assessee was the price indicated in the foreign contract as reduced by 13.4 per cent for the following : (1) 4 per cent on FOB value as STC's consideration. (2) 5 per cent on FOB value as foreign buyer's agents commission. (3) 3.4 per cent on FOB value towards inspection costs. (4) 1 per cent on FOB value to be retained by the foreign buyer on account of hidden defects. 8. It would be seen that the three items of alleged expenditure which are in dispute are those covered by items 2, 4 and 3 respectively of clause 7 of the aforesaid letter or agreement, clause 13 of this l....