TaxTMI 
TaxTMI 
1986 (11) TMI 11
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....of certain items of expenditure amounting to Rs. 10,74,535. Out of this amount, the Income-tax Officer declined to allow the claim for an amount of Rs. 6,02,113. Out of the amounts disallowed by the Income-tax Officer, a sum of Rs. 2,05,211 represented the expenditure incurred for export credit guarantee insurance and both the appellate authorities concurrently held that weighted deduction should be allowed and this reference is concerned with this amount only. The appellate authorities held that the payment is made to the export credit guarantee corporation for the information furnished to the assessee regarding credit-worthiness of the foreign purchaser but also providing a guarantee for payment of such amount and such activity for obtain....
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...., services or facilities which the assessee deals in or provides in the course of his business ; (ii) obtaining information regarding markets outside India for such goods, services or facilities ; (iii) distribution, supply or provision outside India of such goods, services or facilities, not being expenditure incurred in India in connection therewith or expenditure (wherever incurred) on the carriage of such goods to their destination outside India or on the insurance of such goods while in transit, where such expenditure is incurred before the 1st day of April, 1978; (iv) maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods, services or facilities ; (v) preparation a....
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....ation for the purpose of being apprised of the credit-worthiness, of the foreign buyer and also providing guarantee for the payment. Sub-clause (ii) contemplates deduction of expenditure for information regarding markets outside India. This is obviously aimed at giving relief in the event of spending the amount for survey of export potential. Therefore, the expenditure incurred by the assessee for obtaining information regarding market potentiality for the goods sought to be put in the stream of export is squarely within the purview of sub-clause (ii). The Appellate Tribunal held that both the items of expenditure fall within sub-clause (ii). In so far as the payment to export credit guarantee corporation is concernea, it is difficult to ac....
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....ring whether such payment can be allowed as a deduction under section 35B of the Act, the Madras High Court held that the commission paid for getting orders does not fall within the items of expenditure set out in clause (b). The nature of activity in the instant case is entirely different and, therefore, this decision does not apply. In K. Vensimal & Sons v. CIT [1986] 157 ITR 807 (Mad), the assessee claimed weighted deduction in respect of various items of expenditure relating to salary, rent, packing, freight and insurance, cooly, insurance premium paid to the Export Credit Guarantee Corporation, trade expenses and legal expenses and, in so far as the insurance premium paid to the Export Credit Guarantee Corporation was concerned, the Ma....