TaxTMI 
TaxTMI 
1999 (8) TMI 62
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....61, in respect of the following expenditures : --------------------------------------------------------------------------------------- Site expenses Amount Percentage --------------------------------------------------------------------------------------- (a) Malaysia 1,12,16,647 100 (b) BRTW (Libya) 39,60,903 &n....
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.... of the devaluation and was, therefore, allowable in the hands of the assessee. He, accordingly, allowed the relief claimed by the assessee. Being dissatisfied with the decision of the Commissioner, the Revenue took the matter in further appeal to the Tribunal. Taking into consideration the annual report for the assessment year 1978-79, the Tribunal found that the liability in question arose on account of purchase of goods and remained to be a trading liability even subsequently. Thus. the Tribunal concurred with the view taken by the Commissioner. The second question relates to the weighted deduction claimed by the assessee. The assessee had claimed weighted deduction by way of export markets development allowance in terms of section 35B(1)(b)(viii) of the Act on various expenses incurred by it including the following: -------------------------------------------------------------------------------------- S. No. Nature of expenditure Amount of allowance Percentage of &nb....
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....ar expenditure is capital or revenue in nature has often presented difficulties in solution in spite of the fact that attempts have been made time and again to enunciate various principles to distinguish a capital expenditure from revenue expenditure but it has not been possible to lay down any exhaustive test to determine the question. However, we feel that in the present case the question posed can be conveniently answered by applying the principle of law enunciated in Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC), as we find that facts of that case are very close to the facts in hand. In that case the assessee suffered loss on the remittance of Rs. 25 lakhs and Rs. 12.50 lakhs in Pakistani currency from Pakistan. The said amounts were included in the assessment of the assessee as part of Pakistani profits. By the time these two amounts came to be repatriated to India, the rate of exchange had undergone a change on account of devaluation of the Pakistani rupee and, therefore, on repatriation, the assessee received only Rs. 25 lakhs and Rs. 12.5 lakhs in Indian currency and lost Rs. 11 lakhs in one case and Rs. 5.5 lakhs in the other in the process of conversion of Pakista....
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....only in respect of the expenditure which specifically falls within the ambit of any one of the sub-clauses from (i) to (ix) of section 35B(1)(b) of the Act. In the instant case, according to the assessee, its claim for weighted deduction falls under sub-clause (viii). The relevant provisions of section 35B read as under : "35B. Export markets development allowance.---(1)(a) Where an assessee, being a domestic company or a person (other than a company) who is resident in India, has incurred after the 29th day of February, 1968, but before the 1st day of March, 1983, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in clause (b), he shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year : Provided that in respect of the expenditure incurred after the 28th day of February, 1973, but before the 1st day of April, 1978, by a domestic company, being a company in which the public are substantially interested, the provisions of this clause s....
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.... manufacturing expenses were directly debitable to the trading and manufacturing account, these do not qualify for weighted deduction in terms of the said Explanation. It is urged that Explanation 2 being clarificatory in nature, it will have retrospective effect and would apply to the present case also. On the other hand, Mr. K. P. Bhatnagar, learned counsel for the assessee, while asserting that Explanation 2 will not apply in relation to the assessment year 1979-80, has stated at the Bar that the expenses in question did not include any manufacturing expenses debitable to a trading or manufacturing account. It is pointed out that in so far as expenses at Sl. No. 1(i) and (ii) are concerned, these were incurred at site in Malaysia and Libya and directly related to the services rendered consequent to the contractual obligations of the assessee. Regarding expenses mentioned at Sl. No. 1(iii), it is submitted that these were payments made to the subcontractor outside India for erection activities, etc., and are again not debited to the trading and manufacturing account. In support of the contention that the said Explanation is applicable only with effect from April 1, 1981, i.e.,....