Calcutta High Court
Jayshree Tea And Industries Limited vs Commissioner Of Income-Tax on 6 June, 1989
Equivalent citations: [1993]202ITR695(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1975-76, the following questions of law have been referred to this court :
"1. 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 its assessment for the accounting period relevant to the assessment year 1975-76 in respect of the amounts of Rs. 25,69,739 incurred by the assessee on freight and Rs. 1,662 incurred by it on insurance ?"
2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction of the entire amount of Rs. 1,79,760 being the proportionate head office expenses and not Rs. 71,210 in its assessment for the accounting period relevant to the assessment year 1975-76 ?
3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of surtax liability amounting to Rs. 33,32,024 in computing its income for the accounting period relevant to the assessment year 1975-76 ?"
2. The first question is now concluded by the decision of this court in the case of Bharat General and Textile Industries Ltd. v. CIT [1985] 153 ITR 747.
3. Following the said decision, we answer the first question in the affirmative (sic) and in favour of the Revenue.
4. The third question is also concluded by the decision of this court in the case of Molins of India Ltd. v. CIT [1983] 144 ITR 317.
5. Following the said decision, we answer the third question in the negative and in favour of the Revenue.
6. We now turn to the second question. The fact relating to the second question is that, admittedly, the assessee incurred an expenditure of Rs. 1,79,760 being the head office expenses. According to the assessee, it was entitled to weighted deduction under Section 35B in respect of the said expenditure which pertained to export. The Income-tax Officer negatived the said claim of the assessee by observing that the head office expenses were incurred in India and as such nothing can be allowed. Aggrieved by the said disallowance, the assessee brought the matter by way of appeal before the Commissioner of Income-tax (Appeals). He, following the decision of the Special Bench of the Tribunal of Bombay in I. T. A. No. 3255 of 1976-77 and 3330 of 1976-77, upheld the order and directed the Income-tax Officer to allow weighted deduction to the assessee in respect of an amount of Rs. 71,210 out of the said claim of Rs. 1,79,760.
7. Aggrieved by the said order of the Commissioner of Income-tax (Appeals), the assessee brought the matter by way of appeal to the Tribunal. The Tribunal, after hearing both learned counsel for the assessee and the Departmental representative upheld the order of the Commissioner of Income-tax (Appeals ) by observing that, with respect to the head office expenses, the Commissioner of Income-tax (Appeals) has followed the formula propounded by the Special Bench of the Appellate Tribunal, Bombay. Accordingly, there was no reason to interfere with the order under appeal.
8. Mr. Naha, learned counsel appearing for the Commissioner, has fairly submitted that proportionate head office expenses pertaining to export had to be allowed on certain formula. It appears that the Special Bench of the Bombay Tribunal has fixed a formula for allowing such expenditure. In this case, it appears that the Commissioner (Appeals) as well as the Tribunal have followed the formula evolved by the Special Bench. The reasonableness of such formula has not been questioned before us. It also appears that the Department has also issued a circular accepting the Special Bench formula and allowing proportionate deduction of expenditure. The Allahabad High Court referred to that circular in CIT v. Novelty Trading Corporation [1984] 150 ITR 453. The Allahabad High Court observed that the Central Board of Direct Taxes by its circular dated December 28, 1981, accepted the said decision of the Special Bench in so far as the question of allowability of the weighted deduction under Section 35B of the Act is concerned. The Board has, however, not accepted the apportionment of the claim at 75 per cent. In the instant case, the receiver does not dispute the allowability of the claim. The assessee, however, contends that the rate at which it was allowed is not reasonable. The question of allowability of an expenditure in a given case is basically a question of fact. The receiver has not challenged the determination made by the Tribunal. In our view, the Tribunal upheld the question of claim on the basis of the Special Bench formula on the facts of this case. We do not find any ground to interfere with such determination.
9. For the reasons aforesaid, we answer the second question in the negative and in favour of the Revenue.
10. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
10. I agree.