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[1992] 64 Taxman 184 (Gujarat)/[1993] 204 ITR 458 (Gujarat)/[1992] 104 CTR 276
(Gujarat)[05-12-1991]

[1992] 64 Taxman 184 (Gujarat)

HIGH COURT OF GUJARAT
Parashuram Pottery Works Co. Ltd.
v.
Commissioner of Income-tax*
R.C. MANKAD, ACTG.CJ.
AND J.N. BHATT, J.

IT REFERENCE NO. 89 OF 1983

DECEMBER
 5,
1991 

Section 35B [omitted with effect from 1-4-1989] of the Income-tax Act, 1961 - Export market
development allowance - Assessment year 1976-77 - Whether expenditure incurred in India
by way of inspection fees, dock dues and wharfage, cart and cooly hire, railway, truck and
steamer freight, postage and telephone, insurance and commission, octroi, miscellaneous
and export packing, was eligible for weighted deduction under section 35B - Held, no
FACTS
 
The assessee claimed weighted deduction under section 35B in respect of expenditure incurred by way of
inspection fees, dock dues and wharfage, cart and cooly hire, railway, truck and steamer freight, postage and
telephone, insurance and commission, octroi, miscellaneous and export packing. The ITO rejected the claim
on the ground that all such items of expenditure had been incurred in India. On appeal, the Commissioner
(Appeals) upheld the disallowance of items of expenditure. On second appeal before the Tribunal, the
Tribunal also confirmed the view taken by the Commissioner.
On reference:
HELD
 
So far as the items of expenditure relating to inspection fees, postage and telephone and miscellaneous
expenditure, were concerned, admittedly no details were furnished. In the absence of the relevant details, it
would not be possible to hold that the assessee would be eligible to claim allowance under any one of the
clauses of section 35B. Therefore, the taxing authority was justified in rejecting the claim of the assessee
under section 35B insofar as those items of expenditure were concerned. Insofar as expenses relating to dock
dues and wharfage, cart and cooly hire, railway, truck and steamer freight were concerned, they were part of
transport expenses and such expenses are not allowable under section 35B. As regards expenditure relating
to octroi expenses, it also did not fall in any one of the clauses of section 35B. Thus, considering the facts and
circumstances of the case, the assessee was not entitled to claim by way of weighted deduction in respect of
any of the aforesaid items of expenditure under section 35B.
CASE REVIEW
 
Isabgul Export Corporation v. CIT [1993] 200 ITR 797 (Guj.) followed and relied upon.
CASES REFERRED TO
 
J. Hemchand & Co. v. ITO [1982] 1 SOT 150 (Bom.) (SB) and Isabgul Export Co. v. CIT [IT Ref. No. 95 of
1982 dated 5-12-1991].
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D.A. Mehta and K.C. Patel for the Applicant. M.J. Thakore for the Respondent.
JUDGMENT
 
Bhatt, J. - By this reference under section 256(1) of the Income-tax Act, 1961 ('the Act') the Tribunal has
referred to us for our opinion the following question:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting
the claim of the assessee for weighted deduction under section 35B of the Act on the following
expenditure:
(i) inspection fees, (ii) dock dues and wharfage, (iii) cart and cooly hire, (iv) postage, (v) railway, truck
and steamer freight, (vi) postage and telephone, (vi) insurance and commission, (vii) octroi, (ix)
miscellaneous, and (x)export packing?"
Relevant short facts giving rise to the present reference may be stated at the outset.
That the assessee is a public limited company carrying on business of manufacture and sale of sanitarywares,
crockery, glazed tiles, etc. The company has three factories, one at Morvi, second at Thangadh and the third at
Dhrangadhra, in Gujarat State. During the assessment period of 1976-77, the assessee claimed deduction of
Rs. 1,40,545, by invoking the aids of the provisions of section 35B of the Act.
2. The ITO rejected the claim of the assessee on the ground that all such items of expenditure had been
incurred in India and none of these expenses fell within the ambit of any one of the activities specified in
various sub-clauses of section 35B. The actual items of expenditure, the amounts thereof and the sub-clauses
of section 35B under which the claim was preferred before the ITO are detailed as under:

S. Name of expenses Amount Sub-clause under which deduction

No. Rs. claimed
1 2 3 4
1. (i) Inspection fees 1,670 (ii) , (iii) , (v) , (vi) , (viii) and (ix)
(ii) Dock dues and wharfage 1,270 -do-
(iii) Cart and cooly hire 10,430 -do-
(iv) Postage 1,964 -do-
(v) Railway, truck and steamer 1,76,964 -do-
freight
(VI) Postage and telephone 887 -do-
(vii) Insurance and commission 29,229 -do-
(viii) Octroi 6,620 -do-
(ix) Miscellaneous 24,630 -do-
2,53,664 -do-
2. Export packing 1,58,504 -do-
3. Export telegram charges 1,149 (ii) , (iii) , (v), (vi), (viii) and (ix)
4. Export staff salary 12,269 -do-
Total 4,21,636 -do-

Being dissatisfied with the decision of the ITO, the assessee carried the matter in appeal before the
Commissioner (Appeals). After considering the facts and circumstances and the contentions of the assessee,
the Commissioner upheld the disallowance of items of expenditure, at serial nos. 1 and 2 of the aforesaid
table. However, he allowed the remaining items of expenditure, at serial nos. 3 and 4 of the above table.

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3. The assessee preferred second appeal before the Tribunal and in the appeal, the Tribunal, following the
Special Bench decision in the case of J. Hemchand & Co. v. ITO [1982] 1 SOT 150 (Bom.), confirmed the
view taken by the Commissioner.
4. So far as the items of expenditure relating to inspection fees, postage and telephone and miscellaneous
expenditure are concerned, admittedly, no details are furnished. In absence of the relevant details, it will not
be possible to hold that the assessee would be eligible to claim allowance under any one of the clauses of
section 35B. Therefore, the taxing authority was justified in rejecting the claim of the assessee under section
35B insofar as those items of expenditure are concerned.
5. Insofar as expenses relating to dock dues and wharfage, cart and cooly hire, postage, railway, truck and
steamer freight are concerned, they are part of transport expenses and such expenses are not allowable under
section 35B as held by us in almost identical matter in Isabgul Export Co. v. CIT [IT Ref. No. 95 of 1982
dated 5-12-1991].
As regards expenditure relating to octroi expenses, it also does not fall in any one of the sub-clauses of
section 35B. Therefore, the assessee is not entitled to claim any such allowance under section 35B.
6. Thus, considering the facts and circumstances of the case, we are of the opinion that the assessee is not
entitled to claim by way of weighted deduction in respect of any of the aforesaid items of expenditure under
section 35B and the Tribunal was justified in rejecting the claim of the assessee on the aforesaid items of
expenditure.
7. In the result, the question is answered in the affirmative and against the assessee. Reference answered,
accordingly, with no order as to costs.
■■

*In favour of revenue.

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