Delhi High Court
Commissioner Of Income-Tax, Delhi-I vs Indian Aluminium Cables Ltd. (No. 2) on 23 January, 1989
Equivalent citations: [1990]184ITR587(DELHI)
JUDGMENT Leila Seth, J.
1. This is an application under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), praying that the Income-tax appellate Tribunal be directed to draw up a statement of case and refer the following two questions of law for the opinion of this court :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that weighted deduction under section 35B is allowable on Rs. 50,619 paid to Export Credit and Guarantee Corporation ?
2. Whether, on the facts and in the circumstances of the case, a part of the expenses on printing and stationery (Rs. 24,420), posts and telegraphs (Rs. 4,880), electricity charges (Rs. 76,670), rent (Rs. 84,085) and staff salaries (Rs. 88,978) qualifies for weighted deduction as expenditure incurred wholly and exclusively for any of the purposes mentioned in clause (b) of sub-section (1) of section 35B ?"
2. During the course of arguments, Mr. S. K. Agarwal, counsel for the assessed. Handed over copies of the order of the Appellate Assistant Commissioner dated March 30, 1978, in Appeal No. 143 of 1977-78. He pointed out that the order of the Appellate Assistant Commissioner which was in the paper book was clearly not a correct order as it was dated January 29, 1981, whereas the Tribunal's order was passed on April 19, 1980. Mr. Wadera, appearing for the commissioner of Income-tax, agrees that a wrong order has been annexed and says that the copies of the order handed over by counsel for the assessed be taken on record. We direct accordingly.
3. The relevant assessment year is 1976-77, payment of Rs. 50,619 was made to the Export Credit and Guarantee Corporation. The Appellate Assistant Commissioner, following the case of the Income-tax Appellate Tribunal Bombay Bench-B in Income-tax Appeal No. ITA 3837 (Bom) of 1971-72 decided on October 15, 1975, held that the amount paid to the Export Credit and Guarantee Corporation for getting information regarding the credit worthiness and reputation of the buyers was necessary for fixing the limit of the buyers and without this information, the export sales would have been hampered and/or jeopardised.
4. Consequently. He came to the conclusion that this expenditure was covered by sub-clause (ii) of section 35B(1)(b) of the Act and qualified for weighted deduction.
5. The Income-tax Appellate Tribunal, by its order dated April 19, 1980 upheld this contention.
6. The Commissioner of Income-tax moved an application under section 256(1) of the Act, the Tribunal noted that argument of counsel for the Commissioner that sub-clause (iii) of section 35B(1)(b) prohibits any allowance for insurance and freight. But the Tribunal rejected the application after noting the contention of counsel for the assessed that the company "merely insured against the creditworthiness of the foreign importers and that the term insurance was not insurance based on the value of the goods exported". According to it, the Tribunal had given a clear finding that the claim of the assessed was covered under sub-clause (ii) and, consequently, the contention of the departmental representative was misconceived.
7. It appears to us that the finding of the Appellate Assistant Commissioner that the expenditure was covered by sub-clause (ii) of section 35B(1)(b) which was affirmed by the Tribunal is a finding of fact. This is further reaffirmed by the fact that expenditure on insurance on goods in transit was specifically not allowed by the Tribunal as brought to our notice by Mr. S. K. Aggarwals and that it had rejected the claim of the assessed of Rs. 56,001 pertaining to "insurance on transit". Consequently, we are of the opinion that question No. 1 is not a question of law and does not need to be referred.
8. Coming to the second question which pertains to the expenses of printing and stationery, etc., it is clear that the finding regarding the portion of the expenditure to be allocated to export is a question of fact. In CIT v. Raunaq International Ltd. [1986] 158 ITR 701, a Bench of this court observed, while rejecting the application under section 256 of the Act. That the only question was with regard to the extent to which the items of expenditure could be related to export sales and this apportionment was a question of fact. It also observed that, except for the expenditure falling under sub-clause (iii), the expenditure falling under the other sub-clauses of section 35B of the Act did not necessarily have to be incurred in India, provided the expenditure promoted development of exports in the various aspects referred to in those clauses.
9. The Tribunal's finding that the expenses were covered by the various sub-clauses of section 35B(1)(b) is a finding of fact, the finding that 36 per cent., of the assessed's turnover pertained to export sales and apportionment should be made accordingly is also a finding of fact. Consequently. no question of law arises out of the Tribunal's order dated April 19, 1980.
10. The application is, accordingly, rejected. However, we make no order as to costs.