Gujarat High Court
Parshuram Pottery Works Co. Ltd. vs Commissioner Of Income-Tax on 5 December, 1991
Equivalent citations: [1993]204ITR458(GUJ)
JUDGMENT J.N. Bhatt, J.
1. By this reference under section 256(1) of the Income-tax Act, 1961 ("the Act", for short), the Income-tax Appellate Tribunal ("the Tribunal", for shot), has referred to us for our opinion the following question :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting the circumstances of the assessee for weighted deduction under section 35B of the Act on the following expenditure :
(i) Inspection fees, (ii) dock dues and wharfage, (iii) car and cooly hire, (iv) postage, (v) railway, truck and steamer freight, (vi) postage and telephone (vii) insurance and commission, (viii) Octroi, (ix) miscellaneous, and (x) export packing ?"
2. The relevant short facts giving rise to the present reference may be stated at the outset.
3. The assessee is a public limited company carrying on business of manufacture and sale of sanitaryware, crockery, glazed tiles, etc. The company has three factories, one at Morvi, one at Thangadh and the third at Dhrangadhra, in Gujarat State. During the assessment period of 1976-77, the assessee claimed deduction of Rs. 1,40,545 by invoking the aid of provisions of section 35B of the Act.
4. The Income-tax Officer rejected the claim of the assessee on the ground that all such items of expenditure had been incurred in India and none of these expenses fell within the ambit of any of the activities specified in various clauses of section 35B of the Act. The actual items of expenditure, the amounts thereof and the clauses of section 35B under which the claim was preferred before the Income-tax Officer are detailed as under :
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Sl. No. Name of expenses Amount Sub-clause under
Rs. which deduction
claimed
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(1) (2) (3) (4)
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1. (i) Inspection fees 1,670 (ii),(iii),(v),(vi),
(viii) and (ix)
(ii) Dock dues and
wharfage 1,270 -do-
(iii) Cart and cooly hire 10,430 -do-
(iv) Postage 1,964 -do-
(v) Railway, truck and
steamer freight 1,76,964 -do-
(vi) Postage and telephone 887 -do-
(vii) Insurance and
commission 29,229 -do-
(viii) Octroi 6,620 -do-
(ix) Miscellaneous 24,630 -do-
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2,53,664
2. Export packing 1,58,564 -do-
3. Export telegram charges 1,149 -do-
4. Export staff salary 12,269 -do-
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Total 4,21,636 -do-
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5. Being dissatisfied by the decision of the Income-tax Officer, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals) ("the Commissioner", for short). After considering the facts and circumstances and the contentions of the assessee, the Commissioner upheld the disallowance of items of expenditure, at Serial Nos. 1 and 2 of the above table.
6. The assessee preferred a second appeal before the Tribunal and in the appeal, the Tribunal following the Special Bench decision in the case of J. Hemchand and Co. (I. A. Nos. 3255 and 3330/ (Bom) of 1976-77, dated June 17, 1978) confirmed the view taken by the Commissioner.
7. So far as the items of expenditure relating to inspection, fees, postage and telephone and miscellaneous expenditure are concerned, admittedly, no details are furnished. In the absence of the relevant details, it will not to possible to hold that the assessee would be eligible to claim allowance under any one of the clauses of section 35B of the Act. Therefore, the taxing authority was justified in rejecting the claim of the assessee under section 35B of the Act in so far those items of expenditure are concerned.
8. In so far as expenses relating to dock dues and wharfage, cart and cooly hire, postage, railway, truck and steamer freight are concerned, they are part of transport expenses and such expenses are not allowable under section 35B of the Act as held by today (December 5, 1991) in almost an identical matter (Income-tax Reference No. 95 of 1982) Isabgul Export Corporation v. CIT [1993] 200 ITR 797.
9. As regards expenditure relating to octroi expenses, it also does not fall in any one of the clauses of section 35B of the Act. Therefore, the assessee is not entitled to claim any such allowance under section 35B of the Act.
10. Thus, considering the facts and circumstances of the case, we are of the opinion that the assessee is not entitled to claim by way of weighted deduction on any of the aforesaid items of expenditure under section 35B of the Act and the Tribunal was justified in rejecting the claim of the assessee on the aforesaid items items of expenditure.
11. In the result, the question is answered is answered in the affirmative and against the assessee. Reference answered accordingly, with no order as to costs.