India Trade Promotion ... vs The Commissioner Of Income-Tax
1999 Latest Caselaw 194 Del

ORDER

Arun Kumar, J.

1. By way of the present petition under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), the petitioner has prayed that the Income-tax Appellate Tribunal be directed to draw up a statement of case and refer the following questions for the opinion of this Court :

"(1) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the expenses incurred on freight, packing and handling, insurance and custom bonded warehouse are not eligible for weighted deduction under section 35B(1)(b) of the I.T.Act, inspite of the fact that these expenses were incurred for organising and conducting trade fairs?

(2) Whether it was permissible for the Tribunal to adjudicate or give a finding on a question which was not agitated or in respect of which no relief was claimed or which was not in dispute and which did not form the subject matter of the appeal?

(3) Whether in the facts and circumstances of the case, the Tribunal was justified in allowing only 1/3rd of participation charges (Rs.19,98,172) and construction/decoration (Rs. 55,12,683) as being eligible for weighted deduction without disclosing any basis for such a view?

(4) Whether in the facts and circumstances of the case, the Tribunal has enlarged the scope or the proceedings by granting to the department a relief which was never the subject matter in the proceedings before the assessing authority or before the Tribunal?

(5) Whether in the facts and circumstances of the case, the Tribunal was empowered to enhance the tax liability of the assessee?

2. The learned counsel for the petitioner/assessee could not satisfy us as to how questions No. 2, 4 and 5 arise out of the order of the Tribunal. These questions cannot be directed to be referred for the opinion of this Court. The hearing really centered around questions No.1 and 3. The petitioner/assessee is a trade promotion agency of the Government of India. Its objective is to develop market for exports and promote exports. For this purpose it organises and participates in trade fairs in India and abroad. The case pertains to the assessment year 1982-83. The question for consideration centres around section 35B of the Act. The assessee claimed weighted deductions with respect to certain items of expenditure. These items fall in two heads:

(i) Freight, packing and handling, insurance and customs bonded warehouse.

The expenses incurred by the assessee under these heads and for which weighted deductions were claimed under section 35B(1)(b) of the Act were totally disallowed.

(ii) Participation charges and construction/decoration.

3. The expenses claimed under these heads were held by the Tribunal to partly qualify for weighted deduction under section 35B(1)(b)(i) of the Act and the assessee was held entitled to 1/3rd weighted deduction in respect of these items.

4. Question No.1 proposed above pertains to the first head while question No.3 pertains to the second head.

Freight, packing and handling, insurance and customs bonded warehouse.

5. The learned counsel for the assessee submitted that the expenses incurred in connection with the above items were all eligible for weighted deduction under section 35B(1)(b). According to him these expenses were incurred in connection with the object of the assessee, i.e., promotion of trade. He, however, could not point out any specific provision in section 35B of the Act under which these expenses could be said to be admissible for weighted deduction. When the question of weighted deduction is specifically governed by provisions of the Statute, the same cannot be considered or allowed outside the Statute. Therefore, the assessee has to make out a case that a particular claim for weighted deduction falls within a particular provision of Section 35B. The learned counsel for the Revenue rightly emphasised that none of these expenses qualify for weighted deduction under the relevant provision of law and, therefore, the Tribunal rightly rejected the same. According to the learned counsel, the law is settled in this behalf and, therefore, there was no need to seek opinion of this Court. The learned counsel relied on Gedore Tools India Private Limited Vs. Commissioner of Income-tax 233 ITR 712 to point out that freight and forwarding charges have been held to be not eligible for weighted deductions. Similarly he relied on Commissioner of Income-tax Vs. International Exporters (Delhi) 233 ITR 23 wherein it was held that expenditure on insurance was not admissible as a weighted deduction. Reliance was placed on a decision of the Supreme Court in Commissioner of Income-tax Vs. Stepwell Industries Limited 228 ITR 171. Similarly expenses in connection with customs bonded warehouse do not fall in any of the clauses under section 35B(1)(b) of the Act and cannot qualify for weighted deduction. A plain reading of the provision contained in Section 35B(1)(b) shows that none of these items can fall within the provision.

Participation charges and construction/decoration.

6. Coming to the second head regarding participation and construction/decoration expenses, the Tribunal has itself held that these expenses cannot be said to be wholly and exclusively for the purpose of publicity and advertisement. Sub-section (b) of section 35B(1) uses the words "incurred wholly and exclusively". Therefore, for a particular head of expenses to qualify for weighted deduction the same should be wholly and exclusively relatable to the object. Whether particular expenses were wholly or exclusively for a particular purpose or partly for that purpose is a question of fact. The Tribunal has held that since these expenses were not wholly and exclusively relatable to the activity involved, they would qualify only to the extent of 1/3rd for purposes of weighted deduction. This is in our view a question of fact and does not require to be referred to this Court for opinion.

7. When the law is clear and well-settled on a particular point, there can be no occasion for asking the Tribunal to refer such a point for the opinion of this Court. So far as question No.1 proposed by the assessee is concerned, none of the expenses covered by the said question fall within Section 35B(1)(b) and, therefore, none of them can be said to be admissible for weighted deduction. The plain reading of the provision shows this. Moreover, there are decisions already referred to which have taken the same view. The other question, i.e., question No. 3 proposed by the assessee does not involve any question of law and, therefore, does not qualify for being referred for opinion of this Court. So far as questions No. 2, 4 and 5 are concerned, we agree with the Tribunal that they do not arise from the order of the Tribunal.

8. The result is that this petition fails. We reject the prayer of the assessee for calling upon the Tribunal to frame statement of the case and refer the questions of law suggested by the assessee for opinion of this Court. This petition under section 256(2) of the Act is dismissed.