Punjab-Haryana High Court
Commissioner Of Income-Tax vs Oswal Woollen Mills Ltd. And Anr. on 29 April, 2002
Equivalent citations: [2002]256ITR694(P&H)
Author: N.K. Sud
Bench: N.K. Sud
JUDGMENT Jawahar Lal Gupta, J.
1. The Tribunal has referred the following two questions for the opinion of this court :
"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing weighted deduction on bank interest on packing credit ?
(ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the assessee's claim for leave with wages, ignoring the fact that this was not an ascertained liability but a contingent liability and hence not allowable under the law ?"
2. Regarding the first question, Mr. Sawhney contends that the weighted deduction on bank interest on packing credit would not have been allowed as the ingredients of Section 35B were not satisfied. The claim as made was controverted by Mr. Sanjay Bansal on the basis of the decision of the Madhya Pradesh High Court in CIT v. Vippy Solvex Product Pvt. Ltd. [1986] 159 ITR 487.
3. A perusal of Section 35B(1)(b)(viii) would show that the weighted deduction is admissible only if the expenditure is incurred "wholly and exclusively" on the "performance of services outside India." These services must be "in connection with, or incidental to, the execution of" a contract. The said contract should be for the supply of goods or providing services or facilities outside India. In the present case, nothing has been pointed out by counsel to show that the loan advanced by the bank was for the performance of any service or supply of goods or for the execution of a contract outside India. The payment is not shown to have been made for any service rendered beyond the limits of this country. In view of this factual position, the ingredients of the provision are not fulfilled. The claim of the assessee was wrongly allowed.
4. Mr. Bansal contends that a contrary view has been taken by the Madhya Pradesh High Court. He appears to be right. However, we find that there is a binding precedent of this court. In CIT v. O. K, Hosiery Mills [1999] 236 ITR 405, a Bench of this court has held that where "there was no evidence on record to show that the bank had rendered any service outside India", weighted deduction was not admissible. Similar is the position in the present case.
5. Resultantly, the first question is answered in favour of the Revenue.
6. Regarding the second question, Mr. Sawhney has very fairly conceded that the answer to the question is concluded against the Revenue by the decision of this court in CIT v. Oswal Woollen Mills Ltd, [2002] 254 ITR 666. In view of the admitted position, the second question is answered against the Revenue.
7. Disposed of accordingly. No costs.