Kerala High Court
Commissioner Of Income-Tax vs Bakul Cashew Company on 3 September, 1991
Equivalent citations: [1992]197ITR135(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Paripoornan, J.
1. At the instance of the Revenue, the Income-tax Appellate Tribunal (in short, "the Tribunal") has referred the following two questions of law for the decision of this court :
" 1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction in respect of the expenses on salary and expenses to the staff engaged in the export sales ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in treating 75% of the salary and allowances to be eligible for weighted deduction and is not the order and the estimate at 75% unreasonable, unsupported by materials and based on conjecture and surmises ?"
The respondent is a cashew company. It is an exporter. We are concerned with the assessment year 1977-78 for which the accounting period ended on November 30, 1976. Amongst others, the respondent-assessee claimed salary and allowances to the staff engaged in export sales in the sum of Rs. 43,000. Weighted deduction under Section 35B in respect of the said amount was negatived by the Income-tax Officer. In appeal, the Commissioner of Income-tax (Appeals) held that the assessee was entitled to deduction of 75% of the salary paid to the clerical staff. In further appeal before the Tribunal by the Revenue, the Tribunal held that there was no reason to interfere with the order passed by the Commissioner of Income-tax (Appeals). The Tribunal relied upon its earlier decision in Kerala Nut Food Co. Ltd v. CIT (I.T.R. Nos. 333 to 336(Coch)/1981), dated February 26, 1983. It is, thereafter, at the instance of the Revenue that the two questions, formulated hereinabove, have been referred for the decision of this court.
2. We heard counsel. The earlier decision of the Tribunal, rendered in Kerala Nut Food Co. Ltd. v. CIT (I.T.A. Nos. 333 to 336 of 1981), dated February 26, 1983, came up before this court in I.T.R. Nos. 176 to 179 of 1987. The matter was exhaustively reviewed by a Bench of this court and judgment was rendered in the said cases and connected cases in I.T.R. Nos. 180 to 187 of 1987, on April 2, 1991 (CIT v. Kerala Nut Food Co. (19911 192 ITR 585]). After referring to the provisions of Section 35B, the decision of the Appellate Tribunal in ). Hemchand and Co. (I.T.A. Nos. 3255 and 3330(Bom)/76-77, dated June 17, 1978) and the circular of the Central Board of Direct Taxes dated December 28, 1981, this court held that the decision of the Tribunal rendered in I.T.A. Nos. 333 to 336(Coch) of 1981 is in accord with the circular issued by the Central Board of Direct Taxes dated December 28, 1981 which, in turn, gave effect substantially to the decision of a Special Bench of the Tribunal in J. Hemchand and Co.'s case. It is clear from a reference to Clause 3(a) of the circular aforesaid, which has been extracted in paragraph 7 of the judgment of this court, that the assessee will be entitled to weighted deduction in respect of the expenses on salary and the expenses on the staff engaged in the export sale irrespective of the fact whether the same is incurred in or outside India. Following the Bench decision of this court in I.T.R. Nos. 176 to 187 of 1987 (CIT v. Kerala Nut Food Co, [1991] 192 ITR 585), dated April 2, 1991, we answer question No. 1 referred to this court in the affirmative, in favour of the assessee and against the Revenue and hold that the assessee is entitled to weighted deduction in respect of the expenses on salary and expenses to the staff engaged in the export sales.
3. The only other question that remains to be answered is whether there was any basis for the Commissioner of Income-tax (Appeals) to confine the relief to 75% of the salary paid to the clerical staff. The order passed by the Commissioner of Income-tax (Appeals) dated June 18, 1981, does not contain any basis therefor. The Tribunal, by its appellate order dated March 14, 1983, has simply affirmed the order passed by the Commissioner of Income-tax (Appeals). The matter has not been discussed in detail. There is no material to show as to why and how 75% of the salary and allowances were held to be eligible for weighted deduction. The Tribunal, as the final fact-finding authority, should have given reasons for its conclusions. If the Commissioner of Income-tax (Appeals) gave sufficient reasons and the Tribunal has only affirmed them, that would have been sufficient. But, in this case, the Commissioner of Income-tax (Appeals) has not given any reasons. Therefore, we are in the dark as to why and on what basis the appellate authorities confined themselves to estimate the relief to 75% of the amount actually incurred. That is a matter on which the Tribunal, as the final fact-finding authority, should apply its mind and record its reasons for treating 75% of the salary and allowances as eligible for weighted deduction. We, therefore, answer question No. 2 in the affirmative and hold that the estimate made by the Tribunal, treating 75% of the salary and allowances to be eligible for weighted deduction, is purely arbitrary. It is not supported by materials. We answer the question to this extent but decline to fix the amount which the assessee is entitled to by way of deduction for salary and allowances to staff engaged in export sales under Section 35B of the Act. That is a matter which the Tribunal should fix, regard being had to all the facts and circumstances. We, therefore, answer question No. 2, referred to this court, in part and direct the Tribunal to restore the appeal to file on this limited aspect and determine the quantum of deduction permissible towards the salary and allowances to staff engaged in export sales. To this extent, there will be an order of remit and no further. We answer the questions referred to this court in the above manner.
4. A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.