Commissioner of Income Tax vs Bank of India

F.I. Rebello, J.—The appeal by the Revenue is in respect of the assessment year 1981-82. The question of law as formulated in para 5 really pertains to weighted deduction.

With the above a few facts may now be set out. The Assessing Officer rejected the assessee''s claim of deduction u/s 35B. The Commissioner of Income Tax (Appeals) accepted in principle that the assessee was entitled to deduction u/s 35B. The Assessing Officer thereafter made certain orders for giving effect to the order of the Commissioner of Income Tax (Appeals). Two appeals were preferred by the assessee in connection with the orders passed by the Assessing Officer to give effect to the earlier order of the Commissioner of Income Tax (Appeals).

In the appeal before the Income Tax Appellate Tribunal the relevant facts have been narrated in paragraph 7. After considering the various contentions of the parties before it the learned Income Tax Appellate Tribunal in paragraph 11 in so far as expenditure on items such as municipal taxes, salary, provident fund, rent, tax, insurance, light and power expenses estimated it at 25 per cent, of the total expenses and arrived at a conclusion that it was at a lower side and that a higher proportion of expenditure should have been allowed for weighted deduction for the items aforestated other than salary and, therefore, held that these items would be eligible for weighted deduction to the extent of 50 per cent, of the expenses. The Tribunal concurred with the finding of the Commissioner of Income Tax (Appeals) that the salaries, allowances, provident fund contribution to the employees in overseas branches should be held eligible to the extent of 25 per cent. only. The Tribunal disagreed with the finding of the Commissioner of Income Tax (Appeals) that the entire law charges should not be treated as invested with the character of export market development expenses and directed that these expenses to the extent of 25 per cent, may be held as eligible for weighted deductions. It accepted the finding by the Commissioner of Income Tax (Appeals) in the matter of travelling expenses in foreign branches of 50 per cent. It, however, felt that in the matter of advertisement in foreign branches it should qualify for 100 per cent weighted deduction instead of 75 per cent, so treated by the Commissioner of Income Tax (Appeals). The various other weighted deductions are also stated therein. It is not necessary for us to reproduce the same. In the light of that the Assessing Officer was directed to recompute the weighted deductions to the assessee u/s 35B of the Income Tax Act in accordance with the Act for both the assessment years 1980-81 and 1981-82.

The Tribunal also noted that the assessee''s appeal for the assessment year 1981-82 there are some grounds of appeal of which ground No. 2 seeks that the entire income of the assessee''s Singapore branch should be excluded from the total income of the assessee assessable to tax in India. Similarly, ground No. 3 that the entire income of the assessee''s branches in Japan should also be excluded from the total income of the assessee assessable to tax in India. It was pointed out that these grounds of appeal were covered in favour of the assessee as per paragraphs 18 and 19 of the order of the I.T.A.T., B-Bench, Bombay, dated June 4, 1990, in the case of the assessee for the assessment years 1977-78 to 1979-80, 1980-81, 1982-83 and 1983-84 Japan) and the assessment years 1979-80, 1980-81, 1982-83 and 1983-84 (Singapore). Following those orders the two grounds were allowed in respect of the assessment year 1981-82 also.

In the course of the hearing our attention was invited on behalf of the respondents to the judgment in the Commissioner of Income Tax (Central) Vs. Piramal Spinning and Weaving Mills Ltd., to contend that the percentage which should be allowed to the assessee by way of weighted deduction was a question of estimation to be arrived at on the facts and the materials on the record and did not give rise to any question of law for reference to the High Court.

In our opinion question No. 1 of law as framed pertains to the matter of weighted deduction. In so far as the other questions are concerned as noted by the Tribunal the assessee was given benefit for establishments both in Japan and Singapore. That has not been challenged. That has been accepted by the Revenue. Thus, those questions would not arise. In the light of that, appeal dismissed.