Case: Commissioner of Income Tax Vs. Bombay Burmah Trading Corporation

The respondent-assessee is an Indian resident company. It is carrying on the business of exporting tea. In the aforementioned assessment years it claimed weighted deduction under Section 35-B of the Income-tax Act (for short `the Act) in respect of the expenditure of Rs. 1,95,935/- incurred on export of tea from East Africa to the United Kingdom. The claim was disallowed by the Income-tax Officer on the ground that Section 35-B would apply only if the exports were made from India. That view was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. Among others, the following two questions in Income Tax Reference No. 242 1976 and question No. 2 in Income Tax Reference No. 10 of 1987 were referred to the High Court of Judicature at Bombay by the Income-tax Appellate. Tribunal under Section 256(1) of the ActWhether on the facts and in the circumstances of the case, the provisions of Section 40(c)(iii) 40(a)(v) applied in the case of the employees of the Assessee in its overseas branches ?(2) Whether on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under SEction 35-B in respect of the expenditure of Rs. 1,95,935/- incurred on export of tea from East Africa to the United Kingdomfirst question was answered in the negative i.e in favour of the assessee and against the Revenue following the judgment in the case of the respondent-assessee for the earlier assessment years in Bombay Burmah Trading Corporation Ltd. v. Commissioner of Income Tax, Bombay City-IV, 1984(145) ITR 793. It is conceded by the learned counsel for the parties that t his question is covered against the Revenue by the judgment of this Court in Commissioner of Income Tax v. Continental Construction Ltd., 1998(230) ITR 485 affirming the judgment in Continental Construction Ltd. v. Commissioner of Income Tax, 1990(185) ITRto the second question, the High Court answered it in the affirmative i.e. in favour of the assessee and against the Revenue. It will be apt to refer to Section 35-B of the Act, which is the subject-matter of debate in all the five appeals.

Court's reasoning:
Appellate Commissioner and the Tribunal as also the order under appeal passed by the High Court. Though a copy of the return containing details of the expenditure claimed by the respondent under the above provision has not been placed on record, the orders of the departmental authorities as well as of the Tribunal and of the High Court leave us in no doubt that the weighted deduction under Section 35-B was claimed in respect of the expenditure incurred with regard to the performance of the services outside India i.e. in East Africa and United Kingdom in connection with the execution of the contract for the supply of tea of the United Kingdom. Indeed, the said fact is embodied in question No. 2 itself.