Delhi High Court
Nath Bros. Exim International ... vs Commissioner Of Income-Tax on 6 February, 1997
Equivalent citations: 1997 227 ITR 635 Delhi
Bench: D Jain, Y Sabharwal
JUDGMENT
1. At the instance of the assessee, in relation to the assessment year 1974-75, the following questions have been referred for the opinion of this court :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal, was correct in law in holding that the provisions of section 144B of the Income-tax Act, 1961, were applicable to the case ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the provisions of Explanation 1(iv) of section 153(3) of the Income-tax Act, 1961, were applicable to the case ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that weighted deduction under section 35B of the Act was not allowable in respect of freight of Rs. 2,98,550 and insurance of Rs. 5,113 ?
4. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that surtax of Rs. 87,142 determined for the assessment year 1974-75 under the Companies (Profits) Surtax Act, 1964, is not an allowable deduction in the computation of the assessee's income from business ?"
2. Income-tax Reference Nos. 111 and 112 of 1983 :
3. In respect of the assessment years 1976-77 and 1977-78, the questions referred for the opinion of this court are as follows :
"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, on outward carriage representing freight charges from Indian ports to foreign ports, clearing agent's charges and other incidental charges as also on insurance charges covering voyage of exported goods borne by the assessee in respect of the goods exported ?
2. Whether, on the facts and in the circumstances of the case, the surtax assessed on the assessee-company for each of the assessment years 1976-77 and 1977-78 under the Companies (Profits) Surtax Act, 1964, is an allowable deduction in computing the total income of the assessee for each of these years ?"
4. In Smt. Mohinder Jaspal Singh v. CIT [1992] 194 ITR 186, a Bench of this court, of which one of us (D.K. Jain J.) was a member, has held that since the provisions of section 144B of the Income-tax Act, 1961, requiring reference to the Inspecting Assistant Commissioner where the Assessing Officer proposes to vary the income returned by more than Rs. 1 lakh are procedural, they apply even in relation to the assessment years prior to January 1, 1976, with regard to those assessments which had not been completed. It has further been held that once the provisions of section 144B can be invoked in relation to an assessment the period of limitation has to be computed applying Explanation 1(iv) to section 153 of the Income-tax Act, 1961, and the period of 180 days commences from the date on which the Assessing Officer forwards the draft assessment order to the Inspecting Assistant Commissioner.
5. In view of the aforesaid, questions Nos. 1 and 2 in relation to the assessment year 1974-75 are answered in the affirmative, in favour of the Revenue and against the assessee.
6. The third question is again covered by a decision of this court in Handicrafts and Handloom Export Corporation of India v. CIT [1983] 140 ITR 532, where this court has held that the correct interpretation of sub-clause (iii) of section 35(B)(1)(b) is that all expenditure on distribution, supply, etc., of goods outside India, except (i) expenditure incurred in India, in connection with supply, distribution or provision; and (ii) expenditure on carriage or transit insurance of such goods, wherever incurred, is allowable. In this view it was held that the assessee was not entitled to weighted deduction in respect of freight and insurance. We are in respectful agreement with the opinion expressed in this decision. Accordingly question No. 3 is also answered in the affirmative, in favour of the Revenue and against the assessee. Likewise question No. 1 in relation to the assessment years 1976-77 and 1977-78 is answered in the negative, in favour of the Revenue and against the assessee.
7. The Supreme Court in Smith Kline and French (India) Ltd. v. CIT [1996] 219 ITR 581, has held that surtax levied under the Companies (Profits) Surtax Act, 1964, squarely falls within the mischief of sub-clause (ii) of clause (a) of section 40 of the Income-tax Act, 1961, and cannot be allowed as a deduction while computing the business income of the assessee under the provisions of the Income-tax Act. Earlier, the same view was expressed by this court in Orissa Cement Ltd. v. CIT [1993] 200 ITR 636.
8. In this view of the matter, question No. 4 in respect of the assessment year 1974-75 is answered in the affirmative, in favour of the Revenue and against the assessee. Similarly, the second question in respect of the assessment years 1976-77 and 1977-78 is answered in the negative, in favour of the Revenue and against the assessee.
