Delhi High Court
Faqir Chand Raghunath Dass vs Commissioner Of Income-Tax on 15 September, 1993
Equivalent citations: 1994 206 ITR 696 Delhi
Author: B Kirpal
Bench: A Madan, B Kirpal
JUDGMENT
B.N. Kirpal J.
1. In respect of the assessment years 1971-72, 1972-73 and 1973-74, the Income-tax Tribunal, pursuant to a direction issued under section 256(2), has referred the following three questions to this court :
"1. Whether, on the facts and in the circumstances of the case, the customs duty of Rs. 3,02,837 that was paid by the assessed from outside India was an expenditure entitled to weighted deduction under the provisions of section 35B(1)(b) of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case, the customs duty of Rs. 71,295 that was paid by the assessed firm outside India was an expenditure entitled to weighted deduction under the provisions of section 35B(1)(b) of the Income-tax Act ?
3. Whether, on the facts and in the circumstances of the case, the customs duty of Rs. 72,493 that was paid by the assessed firm outside India was an expenditure entitled to weighted deduction under the provisions of section 35B(1)(b) of the Income-tax Act ?"
2. Briefly stated, the facts as found by the Tribunal are that the assessed exported goods from India to Japan and Canada. In those countries customs duty was paid before the goods (which were exported) were allowed to be brought in those countries for sale. The assessed claimed weighted deduction under section 35B by contending that the customs duty so paid was an expenditure which had been incurred, in relation to distribution, supply and provision of goods outside India.
3. The Income-tax Officer did not accept this contention, but the assessed was successful in its appeal before the Appellate Assistant Commissioner. The Revenue then filed a second appeal and the Tribunal came to the conclusion that the expense which was incurred could not be regarded as expenditure in relation to distribution, supply or provision of goods outside India. It came to the conclusion that the duty was paid at a stage anterior to the stage of distribution and, therefore, the benefit under section 35B was not admissible.
4. The application under section 256(1) having been dismissed, the Income-tax Tribunal referred the aforesaid question of law when the application under section 256(2) filed by the assessed was successful.
5. According to learned counsel for the Department, the expense which was incurred by the assessed in paying customs duty, added to the cost of the assessed and, therefore, the deduction in respect thereof could not be allowed under section 35B.
6. In our opinion, the money which was spent by the assessed was clearly an expenditure incurred in relation to the distribution, supply and provision of goods outside India. The goods having been exported from India were to be sold abroad. Without incurring the expenditure of payment of customs duty the said goods could not be distributed, supplied or provided to the markets outside India. A similar situation had arisen in the case of Handicrafts and Handloom Export Corporation of India v. CIT [1983] 140 ITR 532 (Delhi). In that case also, goods were exported from India and customs duty had to be paid in the U.S.A. before the goods entered the market there. A Division Bench of this court came to the conclusion that (at page 543) : "the payment of customs duty was, therefore, an item of expenditure which the assessed incurred in the process of supplying or providing outside India its goods, services and facilities." In coming to this conclusion the court also relied upon the decision of the Madras High Court in the case of CIT v. Kasturi Palayacat Co. [1979] 120 ITR 827.
7. We are in complete agreement with the aforesaid decision in the case of Handicrafts and Handloom Export Corporation of India [1983] 140 ITR 532 (Delhi). Just as the assessed in that case paid customs duty in the U.S.A., in the present case, the customs duty has been paid in Japan and in Canada. The goods could not have been supplied or provided without the assessed incurring this expenditure outside India. The assessed was, therefore, entitled to the benefit of the weighted deduction under section 35B of the Act.
8. For the aforesaid reasons, the questions of law are answered in the affirmative and in favor of the assessed.
9. There will be no order as to costs.
