INDIAN TRADE PROMOTION ORGANIZATION VS COMMISSIONER OF INCOME-TAX
2001 P T D 289
[238 I T R 901]
[Delhi High Court (India)]
Before Arun Kumar and J. B. Goel, J
INDIAN TRADE PROMOTION ORGANISATION
versus
COMMISSIONER OF INCOME‑TAX
I.T.C. No.49 of 1997, decided on 05/03/1999.
(a) Income‑tax‑‑‑
"Reference‑‑‑Law on point well‑settled ‑‑‑ Reference not to be called for‑‑‑Indian Income Tax Act, 1961, S.256.
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 the Court.
(b) Income‑tax‑‑‑
‑‑‑‑Reference‑‑‑Export markets development allowance‑‑‑Weighted deduction‑‑‑Whether expenditure was wholly and exclusively for particular purpose or partly so‑‑‑Question of fact‑‑‑No question arises for reference‑‑ Expenditure must be shown to fall under particular provision of S.35B‑‑ Freight, packing and handling charges, insurance and customs bonded warehouse charges‑‑‑Not eligible for weighted deduction‑‑‑Indian Income Tax Act; 1961, Ss.35B & 256.
When the question of weighted deduction is specifically governed by the 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 of the Income Tax Act, 1961.
Held, that expenditure on freight, packing and handling, insurance and customs bonded warehouse did not fall within the provisions of section 35B(1)(b).
CIT v. International Exporters (1998) 233 ITR 23 (Delhi); CIT v. Stepwell, Industries Ltd. (1997) 228 ITR 171 (SC) and Gedore Tools (India) (Pvt.) Ltd. v. CIT (1998) 233 ITR 712 (Delhi) fol.
Clause (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.
Where the Tribunal had held that since participation and construction/decoration charges 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:
Held, that no question of law arose for reference.
Adarsh B. Dayal with Ms. Sumati Anand for Petitioner.
Sanjeev Khanna with Ajay Jha for Respondents.
JUDGMENT
ARUN KUMAR, J.‑‑‑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 customs bonded‑ warehouse are not eligible for weighted deduction under section 35B(1)(b) of the Income‑tax Act, in spite 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 of 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?"
Learned counsel for the petitioner/assessee could not satisfy us as to how questions Nos.(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 Nos. (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 centers 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.
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.
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:
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 the 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. 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 learned counsel, the law is settled in this behalf and, therefore, there was no need to seek opinion of this. Court. Learned counsel relied on Gedore Tools (India) (Pvt.) Ltd. v. CIT (1998) 233 ITR 712 (Delhi), to point out that freight and forwarding charges have been held to be not eligible for weighted deduction. Similarly, he relied on CIT v. International Exporters (1998) 233 ITR 23 (Delhi), 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 CIT v. Stepwell Industries Ltd. (1997) 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:
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. Clause (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 Tribal 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.
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 Nos. (2), (4) and (5) are concerned, we agree with the Tribunal that they do not arise from the order of the Tribunal.
The result is that this petition fails. We reject the prayers of the assessee for calling upon the Tribunal to frame a 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.
M.B.A./167/FC
Petition dismissed.