Commissioner of Income Tax vs Gannon Dunkerly and Co.

Mrs. Sujata Manohar, J.—This is an application u/s 256(2) of the income tax Act, 1961 (''the Act'') at the instance of the department, asking us to direct the Tribunal to state a case and raise and refer to this Court the following two questions:

Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing weighted deduction u/s 35B in respect of the following items, viz., raw building material; (ii) tools/stores; (iii) rent; (iv) printing stationery pertaining to Kuwait, Nepal and Bhutan offices even when sub-clause (viii) of section 35B(1)(b) confined itself to performance of services outside India and in that view of the matter the order was not perverse ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the local conveyance expenses and other actual expenses incurred by the employees on the conduct of the assessee''s business while on tour should not be included as part of the travelling expenses for the purpose of computing the disallowance under rule 6D of the income tax Rules, 1962?

Question No. 1 relates to allowance of weighted deduction u/s 35B(1)(b)(viii). This particular provision, i.e., sub-clause (viii), was deleted by an amendment which came into effect from 1-4-1981 and was, accordingly, applicable from assessment year 1981-82 onwards. The present question relates to assessment year 1980-81 when this sub-clause (viii) was very much in existence. The Tribunal has pointed out that the amendment came into effect expressly only from 1-4-1981 and that Finance (No. 2) Act, 1980 itself indicated that it would come into effect from 1-4-1981. The Tribunal has also made a reference to Circular No. 281, dated 22-9-1980 issued by CBDT which states in paragraph 11.5 that the amendment made in section 35B will take effect from 1-4-1981 and will, accordingly, apply in relation to the assessment year 1981-82 and subsequently also. The Tribunal has further pointed out that for the previous assessment years the petitioner has been granted weighted deduction under this provision in respect of the same items. Since the same provision was in force in assessment year 1980-81 also, the petitioner is entitled to this weighted deduction. In view of this position, there is nothing wrong with the order of the Tribunal in this regard and no useful purpose would be served by raising question No. 1. The order of the Tribunal is clearly not perverse.

The second question is in respect of disallowance under rule 6D of the income tax Rules, 1962. It relates to local conveyance expenses and other actual expenses incurred by an employee while on tour for the purpose of the employer''s business. The Commissioner (Appeals) has directed the ITO to modify the disallowance by excluding such expenses from travelling expenses for the purpose of rule 6D. This finding has been upheld by the Tribunal without any further discussion. In these circumstances, in our view, the Tribunal was clearly right in upholding the findings of the Commissioner (Appeals) that local conveyance expenses and other actual expenses which are incurred by the employee on tour for conducting the assessee''s business cannot be considered as travelling expenses of the employee under rule 6D. The second question, therefore, also does not merit any further consideration. Rule is discharged.

No order as to costs.