TaxTMI 
TaxTMI 
1979 (8) TMI 72
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....he assessment year 1970-71 ? " There is apparently an omission of the word " deduction " after the word " weighted ", where we have added the expression " sic ". In T.C. Nos. 481 to 483 of 1977, the question referred, relating to the assessment years 1971-72, 1972-73 and 1973-74, runs as follows : " Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under section 35B of the Income-tax Act, 1961, in respect of the overhead charges inccurred by it for the maintenance of the two foreign branches at Kulalumpur and Penang and the customs duty paid and packing charges incurred by the said branches for the import of the textile goods from India, for the assessment years 1971-72, 1972-73 and 1973-74 ? " There is an additional aspect in the question referred for the years 1971-72 to 1973-74, which we shall consider separately at the appropriate stage. We may take the statement of the case for 1969-70 in T.C. No. 842 of 1977 as typical of the facts in relation to all these years. The assessee is a registered firm carrying on business in textiles with its head office at Madras with two branches outside India, one at Kulalu....
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....uced by the Finance Act of 1968 with effect from 1st April, 1968. The provision, in so far as it is relevant, runs as follows : " 35B. (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, whether directly or in association with any other person, any expenditure...... 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...... ? " The deduction of one and one-third (1 - 1/3) times the amount of expenditure incurred during the previous year was increased to one and one-half (1-1/2) times by the proviso with effect from February 28, 1973. Clause (b) of s. 35B, to the extent relevant, runs as follows : " (b) The expenditure referred to in clause (a) is that incurred wholly and exclusively on- (i) advertisement or publicity outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business ;...... (iii) distribution, supply or provision outside I....
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.... indication that the expenditure should have been incurred outside India. There is a disallowance of part of the expenditure even outside India, if such expenditure related to the carriage of goods to their destination outside India or on the insurance of such goods while in transit. Similarly, sub-cl. (iv) provides for expenditure or maintenance outside India of a branch, office or agency for the promotion of the sale outside India of goods, services or facilities. The goods, services or facilities must be those in which the assessee dealt. Though in the present case, the Commissioner has pointed out that the assessee had not dealt in the goods, which the foreign branches dealt in, still there is nothing in sub-cl. (iv) which requires that the goods dealt in the foreign branches should also be dealt in India. Unless the words not found in the provision are supplied to the effect that the assessee would have to deal in such goods in India before he can qualify for the allowance of the expenditure outside India, the construction, which the learned counsel for the Commissioner contends for, cannot find acceptance. It was pointed out by Craies on Statute Law, 7th edn., at page 196,....
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....denote is a very brief precis of the section and therefore forms a most unsure guide to the construction of the enacting section, but it is as much a part of the Bill as a cross-heading and I can conceive of cases where very rarely it might throw some light on the intentions of Parliament just as a punctuation mark. " The law in India is the same. In Chandroji Rao v. CIT [1970] 77 ITR 743 at page 745 it is laid down by the Supreme Court : " The marginal heading cannot control the interpretation of the words of the section particularly when the language of the section is clear and unambiguous. " Thus the law is clear that a marginal note is an unsure guide and cannot be resorted to for the purpose of construction excepting in cases of ambiguity. In the present case, we do not find any ambiguity in the section as such and, therefore, the marginal note cannot be taken as controlling the operation or construction of the provision. Learned counsel for the CIT drew our attention to two of the decisions of the Supreme Court in this connection. One is, Bhinka v. Charan Singh [1959] Supp. 2 SCR 798; AIR 1959 SC 960. The relevant passage occurs at page 809 and it runs as follows ....
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....In the notes on clauses, the following passage occurs in relation to s. 35B : " New section 35B provides for the grant of 'Export markets development allowance' to an assessee being a domestic company or a person (other than a company) resident in India, who incurs, after the 29th February, 1961, expenditure under specified categories for development of export markets. The allowance is in an amount equal to one and one-third times the amount of the qualifying expenditure. The qualifying categories of expenditure include, inter alia, expenses on advertisement or publicity outside India in respect of goods, services or facilities which the assessee deals in or provides in the course of his business, expenditure on obtaining information regarding foreign markets for such goods, services or facilities, expenses on the maintenance of a branch, office or agency abroad for the promotion of the sale of such goods, services or facilities, expenses on the preparation and submission of tenders abroad for the supply or provision of such goods, services or facilities, etc. The allowance will be available with reference to expenditure of the specified categories incurred directly by the taxpa....
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....802 Malaysian dollars were purchased from parties in India and the balance of goods worth 12,26,197 Malaysian dollars were purchased locally at Kulalumpur. The ITO himself in his order pointed out : " The assessee has claimed by his letter dated 16-3-70 a sum of Rs. 16,47,059 as relief under section 35B. For the computation of this amount, the assessee has included the entire cost of the goods purchased as part of the expenses of maintaining the foreign branches. This is indeed a strange claim. It is, as if the entire trading activity of the assessee in the foreign countries (sic) and therefore only such overhead expenses as are necessary for the purpose of maintaining the branches would be admissible. Such overhead expenses come to only 61,949 dollars and 1/3rd of this will be admissible as relief u/s. 35B. Applying the rate of Rs. 2-44 per dollar, the relief admissible comes to Rs. 50,386. " It is to disturb this relief of Rs. 50,386 that the Commissioner took proceedings under s. 263. In the order of the Commissioner in para. 5 it is stated : " It is explained that in the Penang Branch the goods dealt in are those purchased only from India there being no local purchases....