Kerala State Cashew Development Corporation Ltd. vs Commissioner of Income Tax

The reference relates to the assessment year 1974-75. The question referred at the instance of the Revenue u/s 256(2) of the Income Tax Act, 1961, is :

"Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction u/s 35B(1)(b) of the Income Tax Act, 1961, in respect of commission payments to Indian agents in India and sales expenditure on export sales incurred in India ?"

There are two facets to the question, one relating to the commission payments to Indian agents in India and the other relating to the sales expenditure on export sales incurred in India. So far as the first aspect is concerned, the Tribunal had remitted the matter to the Income Tax Officer to consider the assessee''s claim for weighted deduction u/s 35B(1)(b) of the Income Tax Act, 1961, in respect of the expenditure incurred in India also, if it is found that the expenditure had been incurred in connection with the export business of the assessee and would fall under the various sub-clauses of Clause (h) of Section 35B(1) of the Income Tax Act, 1961. This question is now concluded in favour of the assessee by the decision of this court in Commissioner of Income Tax Vs. Kerala Nut Food Co., P. Gopinatha Pillai, M. Shamsuddin and Co., Indian Nut Products, Asiatic Export Enterprises and General Industrial Corporation, There this court held that, in respect of such commission payment made to agents in India, the weighted deduction was available, having regard to the circular issued by the Central Board of Direct Taxes referred to in the said judgment. Having regard to this decision, the question referred, in so far as it relates to commission payment to Indian agents in India, has to be answered in the affirmative, in favour of the assessee and against the Revenue. We do so. The second facet of the question relates to the claim for weighted deduction u/s 35B(1)(b) of the Income Tax Act, 1961, in relation to the sales expenditure on export sales incurred in India. This question also was the subject of decision in Commissioner of Income Tax Vs. Aluminium Industries Ltd., . So far as the second aspect is concerned, the Tribunal had remitted the matter to the Income Tax Officer with a direction to allow the claim in relation to the payment of commission to Indian agents in India. In the aforesaid decision in the case of Commissioner of Income Tax Vs. Aluminium Industries Ltd., , this court declined to answer the question referred and directed the Tribunal to adjudicate the question in the light of the decision of the Special Bench in J. Hemchand and Co.''s case (I. T. A. Nos. 3255 and 3330/(Bom) of 1976-77) to the extent it has been adopted or incorporated by the circular of the Central Board of Direct Taxes dated December 28, 1981. Having regard to this decision, we decline to answer the question referred in so far as it relates to sales expenditure on export- sales incurred in India and direct the Income Tax Appellate Tribunal to restore the appeal to file and adjudicate on the question in the light of the decision of the Special Bench in J. Hemchand and Co.''s case to the extent it has been adopted or incorporated by the circular of the Central Board of Direct Taxes, dated December 28, 1981. We dispose of the reference accordingly.

Communicate a copy of this judgment under the seal of this court and the signature of the Registrar to the Income Tax Appellate Tribunal, Cochin Bench for information.