TaxTMI 
TaxTMI 
1980 (8) TMI 6
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....970 but also to an extra allowance under s. 35B of the I.T. Act, 1961. Section 35B grants what its marginal note describes as an " export markets development allowance ". This provision came into the statute book in the year 1968, just about that time, the Central Government's industrial policy was to develop India's export markets and give a fillip to export of goods and services by Indian businessmen, Indian professionals and Indian craftsmen. Government aid to export promotion might assume several forms. Exporters may be proffered with prizes or titles. They may be given subventions and grants in cash or otherwise. They may be granted drawbacks of customs duty. They may be given exemption or reduction from other levies. There may be several other ways of implementing the " Export or Perish " slogan adopted as a natural policy. Income-tax, especially at latter day levels of charge in the higher income brackets, was grudgingly recognised as a disincentive not only to productive effort generally, but to export trade in particular. It was apparently thought that even within the framework of the I.T. Act ways and means must and could be found to advance the export promotion, by pr....
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....sessee-firm's Ceylon project. According to the officer's understanding of s. 35B, weighted deduction cannot be granted to an exporter who cannot show corresponding receipts from the subject of the expenditure. The assessees keep their accounts on the cash basis. Under this system, only actual outgoings are debited in the accounts as expenditure in similar fashion, credit is given only for actual receipts coming in during the year. Under the quite different mercantile system of accountancy, particularly as applied to works contract business, it would be necessary to balance the accounts every year by valuing the work-in-progress and give appropriate credit to such value in every year's profit and loss account, even though no actual receipts from the contract work might fructify during the year. In the assessee-firm's case, however, while there was actual expenditure during the year, there was no actual income. And this was how their accounts too recorded the position. The ITO thought that s. 35B does not apply to a case of this kind. He accordingly disallowed the entire expenditure. The Tribunal, however, took a different view and allowed the assessee's appeal. They held that ....
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....ceipts. Nor is there any indication in the language of section 35B which limits the allowance to fruitful expenditure alone. On the contrary, there are clear indications in the text of this provision to hold that the same principles which apply to the general provisions of section 37 of the Act also apply to the weighted allowances under this section. Mark the words enclosed within brackets " not being in the nature of capital expenditure or personal expenses of the assessee " occurring in section 35B(1)(a) and the words "incurred wholly and exclusively " occurring in section 35B(1)(b). These words have a familiar ring that are a constant reminder to us of the language of section 37. We are satisfied that the Tribunal Was right in its interpretation and application of section 35B in this case. We have to mention in this connection one feature of the assessment order, which makes us wonder whether the ITO had not misdirected himself even on the general law governing deduction of business expenditure. For, while negativing the claim for weighted allowance in the sum of Rs. 59,960, the officer added back the entire figure. This was plainly wrong. In a given case, an item of busines....
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....nto fragments of transactions to see if each qualified separately for any deductions. There can be only one profit and loss account for a business. There cannot be as many profit and loss accounts as there are transactions in a business. It is not, therefore, surprising that the statutory allowances under Chap. IV-D should be business-wise and not transaction-wise. In this context s. 35B has perforce to be applied to the business as a whole and not fragmentally to each and every one of its transactions. One other reason mentioned by the ITO in his assessment order for not granting to the assessee-firm any weighted deduction under s. 35B was the possibility that the assessee-firm might any day become eligible for relief under s. 80-O of the I.T. Act. This latter provision gives an out-and-out tax exemption to a resident assessee who earns income abroad from the activity of making available his industrial, commercial, or scientific knowledge or from allowing the use of his design and brings into this country the income earned therefrom. The section imposes the condition that between the resident assessee and the foreign enterprise there must be a binding agreement and that agreeme....