2003 (7) TMI 31

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....o weighted deduction under section 35B(1)(b)(viii) of the Income-tax Act in connection with expenditure incurred for performance of service outside India?" Facts: The assessee, M/s. Shapoorji Pallonji and Co. have been carrying on business in building construction. In 1970, the assessee submitted a tender for constructing a Palace at Muscat for His Majesty, the Sultan of Oman. For the assessment year in question, the assessee submitted his claim for weighted deduction under section 35B of the Income-tax Act. The deduction claimed by the assessee was for expenses relating to commission paid to National and Grindlays Bank Limited, which executed performance bond of Rs. 37lakhs in favour of the Sultanate of Oman in connection with the ex....

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....red in India and not outside India and, therefore, section 35B(1)(b)(viii) was not attracted. Findings: Before we deal with the contentions advanced on behalf of the Department, we may point out that in this reference we are concerned with the assessment year 1972-73. Section 35B deals with export markets development allowance. Under section 35B(1)(a) it is, inter alia, provided that where an assessee, who is a resident in India, has incurred directly or in association with any other person, any expenditure referred to in clause (b) of that section he shall be allowed deduction of a stipulated sum (hereinafter referred to, for the sake of brevity, as "weighted deduction"). Clause (b) of section 35B(1) has nine sub-clauses. In this ....

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.... (b) of sub-section (1) of section 35B of the Income-tax Act. In this case, we are concerned with sub-clause (viii), which is a general provision and in which there is no prohibition on weighted deduction as is provided for in sub-clause (iii). Sub-clause (viii) merely states that where expenditure is incurred wholly and exclusively on performance of service outside India in connection with the execution of contract for supply of goods/services outside India, the assessee would be entitled to weighted deduction. In sub-clause (viii), there is no prohibition as is contemplated in sub-clause (iii) of an expenditure not being allowed as weighted deduction if incurred in India. In the case of CIT v. Walchandnagar Industries Ltd. [2003] 262 ITR ....