ALLIED EXPORT INDUSTRIES v. INCOME TAX OFFICER
[Citation -1986-LL-0530-4]

Citation 1986-LL-0530-4
Appellant Name ALLIED EXPORT INDUSTRIES
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 30/05/1986
Assessment Year 1979-80, 1981-82
Judgment View Judgment
Keyword Tags export market development allowance • markets development allowance • opportunity of being heard • benefits of partnership • allowable deduction • business promotion • commission payment • promotion expenses • weighted deduction • export of garments • provident fund • membership fee • special bench • staff welfare • foreign buyer • car expenses • audit party • paper mill • new ground
Bot Summary: According to the CIT, the allowance had been wrongly granted by the ITO and that the weighted deduction on expenditure incurred by way of commission could not be allowed in view of the Madras High Court decision in the case of CIT vs. Southern Sea Foods Ltd. 23 : 140 ITR 855. First of all it is contended by him that the CIT had proceeded to take action under s. 263 not on the basis of any objective opinion formed by him on the examination of the record of proceedings before the ITO. It is next contended by Shri Agarwal that in fact the CIT had been coaxed to pass the three orders by the audit party and the orders passed were bad in law. In any case Shri Agarwal submitted that the order of the CIT disallowing expenditure under the head 'Commission' could not be sustained on the ground that the expenditure had been incurred by way of inspection fees as according to him the Tribunal has no authority or jurisdiction to deviate from the grounds taken by the CIT for modifying the order passed by the ITO and holding it to be erroneous and prejudicial to the interests of the Revenue. A close scrutiny of the record of the CIT in respect of the three orders passed under s. 263 shows that the proceedings had not been initiated by the CIT on the basis of any audit report. The IAC Range-I, New Delhi had brought certain facts to the notice of the CIT and thereafter, the CIT had called the IAC for discussion and a report had also been obtained by the CIT from the IAC. The records of assessment as maintained by the ITO had been examined by the CIT and thereafter the CIT had decided to issue notices under s. 263 for the three assessment years. In these two cases, the assumption of jurisdiction by the CIT had been held to be bad in law because that had not been done by an independent application of mind but at the instance of the audit party or the CBDT. In the present case, the facts are entirely different inasmuch as we find that the CIT had independently applied his mind and then came to the conclusion that the orders passed by the ITO were erroneous and prejudicial to the interests of the Revenue inasmuch as deductions had been granted under s. 35B which were not permissible under the law. In total contradistinction to the facts found in the case of Jagadhri Electric Supply Industrial Co. we find in the present case that the correct facts had been withheld from the ITO and the CIT and since these facts were for the first time stated before the Tribunal as per papers contained in the paper book at pages 77 to 85, it cannot be said that while upholding the finding of the CIT that expenditure on so-called commission was inadmissible for weighted deduction under s. 35B, the Tribunal is sharing the exclusive jurisdiction of the CIT to act under s. 263 or that it is approving the order of the CIT on a ground which was available to the CIT and which had not been made the basis of his order.


B. GUPTA, A.M. ORDER These three appeals by assessee, which is firm by status and which carries on business of manufacture and export of garments, are directed against orders passed under s. 263 of IT Act, 19 61 ('the Act'), by CIT in asst. yrs. 19 79-80 to 19 81-82. Since facts in three assessment years are more or less identical, and since identical grounds have been raised in three appeals filed by assessee and since common arguments have been addressed by learned authorised counsel of assessee on one side and by Departmental Representative on other, we would conveniently consolidate them and dispose them of by common order. 2 . In asst. yr. 19 79-80, ITO had granted export market development allowance under s. 35B on following amount of Rs. 8,28,738 : Rs. Salary : 80 pre cent of Rs. 2,65,948 2,12,750 Sweeping charges : 80 per cent of Rs. 2,154 1,723 Commission on export : 100 per cent 2,97,438 Rent : 75 per cent of Rs. 83,100 62,325 Electricity and Water charges : 80 per cent 14,250 Membership : 100 per cent 2,000 Books and Periodicals : 100 per cent 1,629 Car Maintenance (41,216-13,739=27,477): 50 per 13,738 cent allowed Staff welfare (11,103 - 1,000 = 10,103): 50 per cent 5,052 allowed Licence and renewal fees 928 Advertising : 50 per cent of Rs. 5,360 2,980 Samples : full 82,337 Business promotion 57,180 Postages and Telex : 80 per cent of 64,452 51,562 Export expenses 18,800 Stationery : 50 per cent of Rs. 8,077 4,038 8,28,738 On basis of above particulars, ITO made deduction of Rs. 2,76,246 being one-third of Rs. 8,28,738 particularly in asst. yr. 19 80-81, ITO held that following expenses amounting to Rs. 11,26,0 19 were eligible for weighted deduction under s. 35B : Rs. Salary : 80 per cent allowed 2,53,975 Samples : 100 per cent 1,71,846 Business promotion : 80 per cent 1,50,126 Postage and Telegram : 50 per cent 3,145 Telephone and Telex : 80 per cent 48,313 Export expenses : 100 per cent 15,500 Printing and stationary : 50 per cent 5,996 Car maintenance (56,840-18,947=37,984) : 50 per 18,947 cent of this is allowed Electricity and water charges : 80 per cent 13,536 Licence and renewal fee : 100 per cent 187 Books and periodicals : 100 per cent 341 Travelling expenses disallowed Sweeping charges : 80 per cent 2, 19 Membership fee : 100 per cent 3,827 Rent : 75 per cent 95,700 Commission : 100 per cent 3,32,939 Staff welfare : 50 per cent 6,480 Advertisement : 50 per cent 1,475 Conveyance disallowed General expenses : 50 per cent 1,496 11,26,0 19 On basis of above particulars, ITO reduced total income by sum of Rs. 3,75,340, i.e. one-third of Rs. 11,26,0 19 . In asst. yr. 19 81-82 also ITO proceeded to complete assessment on same lines. He held that following expenses of Rs. 8,44,272 qualified for weighted deduction under s. 35B : Rs. 1,91, 19 Commission on export : 100 per cent 3 Service charges on export sales : 100 per cent 1,46,605 Samples : 100 per cent 1,39,101 Business promotion expenses (foreign tour, etc.): 80 1,16,574 per cent allowed Car maintenance : Total claimed at Rs. 70,879 one third disallowed and 50 per cent of balance of Rs. 23,630 47,260 in all Salary : 50 per cent 1,68,269 Rent : 50 per cent 52,800 8,44,272 On basis of above particulars, ITO reduced total income by sum of Rs. 2,81,424, i.e., by one-third of Rs. 8,44,272. 3. According to CIT, above allowances granted by ITO under s. 35B in three assessment years were erroneous insofar as these were prejudicial to interests of Revenue. He, therefore, issued show-cause notices under s. 263 and after giving assessee opportunity of being heard, modified assessments of three assessment years as follows: (a) For asst. yr. 19 79-80 CIT held that weighted deduction granted by ITO in respect of salary, commission, rent, electricity charges, car maintenance expenses and export expenses were erroneous and prejudicial to interests of Revenue. In respect of expenses under head 'Salaries' ITO had allowed weighted deduction to extent of 80 per cent of Rs. 2,65,948 as per details extracted above. CIT held that out of total expenditure on salary, expenditure to extent had been incurred on staff engaged in factory, i.e., in manufacturing process and that, therefore, expenditure to extent that it related to manufacturing activity of assessee, had to be excluded for purposes of working out weighted deduction. After looking into details, he held that expenditure on salary, bonus and provident fund, etc., paid to factory staff amounting to Rs. 1,10,269 is not eligible for weighted deduction. After excluding Rs. 1,10,269 from total expenditure on salary, bonus, etc., amounting Rs. 2,65,948, CIT held that weighted deduction was eligible on remainder sum of Rs. 1,75,679. In accordance with decision of Special Bench of Tribunal in case of J. H. & Co. vs. Second ITO ( 19 82) 1 SOT 150 (Bom) be held that 75 per cent of Rs. 1,75,679 was eligible for weighted deduction. This resulted in enhancement of assessment by sum of Rs. 27,000. CIT further held that no part of expenditure of commission amounting to Rs. 2,97,438 was eligible for weighted deduction. According to him, whole of commission had been paid to Banaras House Ltd. and that since commission had been paid for purpose of procuring orders from foreign buyers, it was ineligible for weighted deduction. According to CIT, allowance had been wrongly granted by ITO and that weighted deduction on expenditure incurred by way of commission could not be allowed in view of Madras High Court decision in case of CIT vs. Southern Sea Foods (P) Ltd. ( 19 82 31 CTR (Mad) 23 : ( 19 83) 140 ITR 855 (Mad). Since ITO had allowed deduction of Rs. 99,146 (one-third of Rs. 2,97,438), CIT withdrew this allowance resulting in enhancement of assessment by sum of Rs. 99,146. In respect of expenditure on rent and electricity charges on which weighted deduction had been allowed by ITO, CIT held that allowance granted by ITO was excessive, inasmuch as, he had not taken into account fact that most of space occupied by assessee for which rent had been paid, had been used for manufacturing activity of assessee. Similarly, CIT held that most of expenditure on electricity having been incurred on production of goods, allowance granted by ITO was excessive. In respect of car maintenance expenses, CIT held that only one-fourth of total expenditure could be considered to be eligible for weighted deduction under s. 35B. For coming to this conclusion, CIT followed order passed by his predecessor in office under s. 263 in asst. yr. 19 78-79. In respect of export expenses, which were held to be cent per cent eligible for weighted deduction by ITO, CIT found on examination of details of expenses that some of expenses related to carriage of goods, etc., which were not eligible for weighted deduction. On facts found by CIT he held that 50 per cent of expenditure under head 'Export expenses' was eligible for weighted deduction. order passed by ITO for asst. yr. 19 79-80 was directed to be modified as per findings of CIT which have been summed up as above. (b) In asst. yr. 19 81-82 CIT reduced grant of weighted deduction as made by ITO under heads 'Salary, commission, rent, electricity charges, car expenses and export expenses' for same reasons as had been given by him while passing order for asst. yr. 19 79-80. (c) In asst. yr. 19 81-82 CIT once again reduced grant of weighted deduction in respect of expenses incurred under heads 'Commission, export expenses, salary, rent and car expense.' 4 . It is in background of abovementioned facts that present three appeals were filed by assessee. Shri C. S. Agarwal, learned authorised counsel of assessee has very vehemently opposed orders passed by CIT, which according to him, were not sustainable in law. According to him, material placed on record clearly established that orders passed by ITO in three assessment years were in accordance with law and in accordance with decision of CIT himself given under s. 263 in asst. yr. 19 78-79. Apart from generally describing orders passed by CIT as attempts on review of orders passed by predecessor-in- office in preceding assessment year and alleging that orders passed were bad in law, Shri Agarwal has raised certain specific objections against impugned orders. First of all it is contended by him that CIT had proceeded to take action under s. 263 not on basis of any objective opinion formed by him on examination of record of proceedings before ITO. It is next contended by Shri Agarwal that in fact CIT had been coaxed to pass three orders by audit party and, therefore, orders passed were bad in law. It is next contended by him that weighted deduction having been allowed by ITO in accordance with decision of Tribunal in case of J. H. & Co. (supra), no error or prejudice against Revenue could be alleged on part of ITO. Referring to certificates is sued by Banaras House Ltd. which are placed at pages 58 and 76 of paper book, learned counsel submits that commission paid to Banaras House Ltd. in three assessment years was on account of services rendered by them in respect of goods exported by assessee and that, therefore, ITO was justified in granting deduction to extent of 100 per cent on expenses on commission. It is further submitted by him that CIT had while passing order under s. 263 in asst. yr. 19 78-79 accepted assessee's contention that expenses on commission were to extent of 100 per cent eligible for weighted deduction under s. 35B and that therefore there was no justification for CIT in three assessment years under appeal to have taken different view. According to Shri Agarwal, decision of Madras High Court in case of Southern Sea Foods (P) Ltd. (supra) could not have been pressed into service by CIT as commission had been paid not for purpose of procuring any orders for t h e assessee but for rendering of varied services by Banaras House Ltd. in connection with exports made by assessee. When it was pointed out to Shri Agarwal with reference to papers furnished at pages 77 to 85 of paper book that commission was paid to Banaras House Ltd. for granting certificates of inspection in respect of Shipments, learned counsel submitted in reply that in fact it was not so and that commission had been paid for bundle for services which had been rendered by Banaras House Ltd. as mentioned in their certificates placed at pages 58 and 76 of paper book. In any case Shri Agarwal submitted that order of CIT disallowing expenditure under head 'Commission' could not be sustained on ground that expenditure had been incurred by way of inspection fees as according to him Tribunal has no authority or jurisdiction to deviate from grounds taken by CIT for modifying order passed by ITO and holding it to be erroneous and prejudicial to interests of Revenue. According to him, CIT has exclusive jurisdiction to act under s. 263 and that if any ground has not been taken by him at time of passing of order under s. 263, then Tribunal would not be entitled to substitute any grounds in place of grounds adopted by CIT which form basis of his order. For so contending reliance has been placed on decision of Hon'ble Punjab and Haryana High Court in case of CIT vs. Jagadhri Electric Supply & Industrial Co. ( 19 81) 25 CTR (P&H) 94 : ( 19 83) 140 ITR 490 (P&H) other authorities on which Shri Agarwal has placed reliance are in Jeewanlal ( 19 29) Ltd. vs. Addl. CIT 19 76 CTR (Cal) 291 : ( 19 77) 108 ITR 407 (Cal) and Sirpur Paper Mills Ltd. vs. CWT ( 19 70) 77 ITR 6 (SC). These two authorities have been relied upon by learned counsel for contending that orders passed by CIT being not based on any independent application of mind or any objective consideration of material on record, should be quashed. Reliance has also been placed on order passed by Tribunal, which is in Mettur Beardsell Ltd. vs. ITO ( 19 85) 11 ITD 631 (Mad). According to him, Special Bench has held in abovementioned case that decision of Hon'ble Madras High Court in case of Southern Sea Foods (P) Ltd. (supra) does not overrule decision of special Bench of Tribunal in case of J. H. & Co. (supra) and, therefore, when Tribunal had held while deciding case of J. H.& Co. (supra) that commission payment of party, which brings about export sales or which furnishes information to assessee about foreign buyers, or which advertises assessee's goods abroad or which brings foreign buyer and inland seller together for purposes of making sales by latter, is allowable deduction and when decision in case of J. H. & Co. (supra) had been accepted by Department and no reference had been filed against it, it could not be said that orders passed by ITO in three years were erroneous insofar as these were prejudicial to interests of Revenue. Reliance has been further placed by Shri Agarwal on another Special Bench decision of Tribunal in case of ITO vs. Bharat Skin Corpn. ( 19 85) 3 SOT 339 (Mad). It is contended on basis of this decision that payment by way of commission to Banaras House Ltd. being for services rendered in fixing of foreign buyers was allowable deduction under s. 35B. Lastly Shri Agarwal has placed reliance on another decision of Tribunal in case of Industrial & General Products vs. ITO ( 19 83) 39 CTR (Mad) 17 at page 21 in order to contend that where ITO has made assessment after taking into account all relevant facts, CIT has no jurisdiction under s. 263 for merely directing that different approach should have been adopted by ITO. In particular, Shri Agarwal has made abovementioned submissions in respect of curtailment of expenditure of commission, which was held by CIT to be wholly ineligible for weighted deduction under s. 35B. In respect of rest of findings given by CIT he has generally contended that those findings should not have been given because they were neither in keeping with views taken by CIT in asst. yr. 19 78-79 nor in any way showed that orders passed by ITO in three assessment years were erroneous insofar as these were prejudicial to interests of Revenue. In any case, Shri Agarwal submits that on merits CIT has no justification in restricting grant of export markets development allowance in respect of various items of expenditure on which deduction under s. 35B had been granted by ITO in three assessment years. 5 . On other hand S. C. Gupta, learned Departmental Representative, has supported, orders passed by CIT. 6. We have given our very careful consideration to objections raised by Shri C. S. Agarwal and points made by CIT in three impugned orders passed under s. 263. We have also gone through voluminous paper book passed under s. 263. We have also gone through voluminous paper book submitted by Shri Agarwal. As desired by Shri C. S. Agarwal, we have also scrutinised record of CIT in order to find out as to whether exercise of jurisdiction by CIT under s. 263 in three assessment years was on basis of objective examination of record of ITO or was based on report of audit party as alleged. After examining matter in all aspects, we will hold as follows. 7. close scrutiny of record of CIT in respect of three orders passed under s. 263 shows that proceedings had not been initiated by CIT on basis of any audit report. IAC (Assessment) Range-I, New Delhi had brought certain facts to notice of CIT and thereafter, CIT had called IAC (Assessment) for discussion and report had also been obtained by CIT from IAC (Assessment). records of assessment as maintained by ITO had been examined by CIT and thereafter CIT had decided to issue notices under s. 263 for three assessment years. In these circumstances, learned authorised counsel of assessee is wrong in alleging that proceedings had not been initiated by CIT on basis of any objective consideration of material on record. proceedings had been initiated strictly in accordance with provisions of s. 263 and, therefore, decisions in Jeewanlal ( 19 29) Ltd.'s case (supra) and Sirpur Paper Mill Ltd.'s case (supra) do not help case of assessee. In these two cases, assumption of jurisdiction by CIT had been held to be bad in law because that had not been done by independent application of mind but at instance of audit party or CBDT. In present case, facts are entirely different inasmuch as we find that CIT had independently applied his mind and then came to conclusion that orders passed by ITO were erroneous and prejudicial to interests of Revenue inasmuch as deductions had been granted under s. 35B which were not permissible under law. preliminary objection of Shri Agarwal that orders passed by CIT were bad in law is, therefore, rejected. assumption of jurisdiction by CIT in three assessment years is upheld and now we will proceed to examine as to whether directions given by CIT in respect of various items of expenditure vis-a-vis their eligibility under s. 35B were in order. While doing so, we will also examine other contentions of Shri C. S. Agarwal challenging correctness of orders passed by CIT in three assessment years. Expenditure on salary : 8. ITO had held that out of total expenditure of Rs. 2,65,948 under head 'Salaries' 80 per cent thereof, i.e., Rs. 2,12,758 was eligible for weighted deduction. grant of deduction under s. 35B, thus, made by ITO was wholly wrong and against law laid down by Special Bench of Tribunal in case of J. H. & Co.'s case (supra). Since expenditure on salary had been incurred partly in respect of employees who were engaged in production of garments and partly in respect of other employees, CIT was justified in excluding that portion of salary from total claim which related to manufacturing process, i.e., which related to production manager, checkers, helpers and cutters, etc., who were employed in factory of assessee. salary paid to such staff amounted to Rs. 85,769. Besides, bonus and provident fund, etc., paid to factory staff was rightly allocated by CIT at Rs. 24,500. total of two amounts of Rs. 85,769 and Rs. 24,500, i.e., Rs. 1,10,269 was not eligible for weighted deduction as this part of expenditure on salary, etc., did not relate to exports but related to production of garments. After deducting Rs. 1,10,269, balance, i.e., Rs. 1,55,679 was eligible for weighted deduction. CIT ought to have directed grant of weighted deduction on this amount but we find that he has directed grant of weighted deduction on amount of Rs. 1,75,679. In other words, he has erred on side of assessee as far as determination of quantum of expenditure on salary eligible for deduction under s. 35B is concerned. As far as percentage of deduction, which was fixed at 75 per cent seems to be quite in order. In case of J. H. & Co. (supra) expenditure on salary paid to staff dealing with exports had been held to be allowable by AAC to extent of 75 per cent and this finding had been upheld by Tribunal as per paragraph 25 of this order. order of CIT curtailing allowance of deduction under s. 35B in respect of expenditure under head 'Salaries' was, therefore, in order in asst. yr. 19 79-80. In asst. yr. 19 80-81, curtailment of allowance was made on same lines as in asst. yr. 19 79-80. only difference in this year was that assessee had failed to give break up of salaries paid to factory staff and others. CIT had, therefore, bifurcated salaries paid to factory staff and others. CIT had, therefore, bifurcated expenditure on salary paid to factory staff and others in same proportion as in asst. yr. 19 79-80. No fault can be found with this approach of CIT. In asst. yr. 19 81-82 also CIT had allowed weighted deduction on expenditure under head 'Salaries' on same lines as was done in previous two assessment years. Since action of CIT was in accordance with decision of Special Bench of Tribunal in case of J. H. & Co.'s case (supra) three orders passed by him withdrawing excessive allowance granted by ITO under s. 35B in respect of expenditure on salary were wholly justified and, therefore, upheld. fact that in asst. yr. 19 78-79, predecessor CIT had while passing order under s. 263 allowed larger deduction can be no ground for assailing action of CIT in present three assessment years, directing grant of correct allowance under s. in respect of expenditure under head 'Salaries'. Expenditure on commission : 9. As would be seen from details given in paragraph 2 of this order, ITO had while working out deduction under s. 35B in three assessment years held that expenditure on commission was to extent of 100 per cent eligible for weighted deduction. It had been contended before CIT on basis of general certificate issued by Banaras House Ltd. that commission had been paid for obtaining information regarding markets outside India, for advertisement and publicity abroad and in connection with services rendered in execution of contract for supply of goods outside India. CIT had rejected contention of assessee as according to him commission had been paid for purposes of procuring orders from foreign buyers and consequently inadmissible for weighted deduction as per decision of Hon'ble Madras High Court in case of Southern Sea Foods (P) Ltd. (supra). We find from close scrutiny of records maintained by ITO and CIT that before both these authorities only photostat copy of general certificate entitled 'To whomsoever it may concern' issued by Banaras House Ltd. had been furnished. In this certificate, Banaras House Ltd. had mentioned various activities which they performed in assisting Indian export. This certificate was brushed aside by CIT as according to him it was general certificate and as it did not in any way show that commission had been paid to Banaras House Ltd. for purposes of obtaining information regarding markets outside India and for advertisement and publicity abroad, etc. correct nature of commission paid has now been made known to us as per specific certificates which have now been furnished by assessee at pages 77 to 85 of paper book. All these certificates mentioned that commission which had been charged from assessee by Banaras House Ltd. was in connection with inspection of goods shipped abroad. These certificates are more or less in same terms. One of these may be reproduced : "Inspection certificate This is to certify that we have inspected goods to be shipped by Allied Export Industries, New Delhi against order No. 92/5438 dt. 31st July, 19 79 placed by Sarma Penney Ltd., Belgium and have found same in order. This certificate of inspection is being issued subject to proviso that if there is any claim of any nature whatsoever from consignee relating to subject goods, same will be to account of supplier, as acceptance of goods by consignee is final." These certificates clearly showed that commission which had been paid to Banaras House Ltd. was not in respect of any of services alleged to have been rendered by them but in respect of inspection of goods only. Such expenditure does not fall within any one of clauses of s. 35B(1) (b) as these were applicable in asst. yrs. 19 79-80 and 19 80-81. In respect of asst. yr. 19 81-82, law had been drastically amended and provisions of s. 35B (1) (b) as these were applicable in that assessment year r/w of IT Rules, 19 62 did not permit expenditure on inspection of goods as eligible for weighted deduction. commission had been paid by way of certification charges and, therefore, it was wholly inadmissible as per law laid down by Special Bench of Tribunal in case of J. H. & Co. (supra). It has been held by their Lordships of Hon'ble Delhi High Court in their decision in Handicrafts & Handloom Export Corpn. of India vs. CIT ( 19 82) 29 CTR (Del) 185 : ( 19 83) 140 ITR 532 (Del) that while examining claim of assessee under s. 35B meticulous analysis should be made to find out as to whether expenditure claimed could be correlated to eight categories of activities mentioned in s. 35B (1) (b). On examining claim of inspection charges paid by assessee to Banaras House Ltd. in three assessment years, we find that it does not fall to be allowable for purposes of weighted deduction either in asst. yrs. 19 79-80 and 19 80-81 or in asst. yrs. 19 81-82 when law was amended. On facts which have been now found by us on basis of papers submitted by assessee, we are of view that so-called expenditure on commission was not allowable under s. 35B in any one of three assessment years. conclusion of CIT has, therefore, to be upheld as far as expenditure described as commission is concerned. point that we have now to examine is as to whether Tribunal can uphold decision of CIT on basis of abovementioned facts found and as to whether decision of Hon'ble Punjab and Haryana High Court in case of Jagadhri Electric Supply & Insustrial Co. (supra) comes in way of Tribunal in upholding order of CIT so far as he has withdrawn s. 35B allowance on so-called commission expenditure. After carefully studying decision of Hon'ble Punjab and Haryana High Court, it appears to us that facts in that case were materially different. There Addl. CIT had found that assessee-firm had been wrongly allowed continuation of registration and, therefore, order of ITO had been cancelled. According to Addl. CIT allocation of shares between partners as made in books of account was different from that mentioned in partnership deed and, therefore, certificate given under s. 184(7) of Act was wrong. When appeal was preferred against order of Addl. CIT Tribunal did not approve grounds taken by Addl. CIT for cancelling continuation of registration but at same time upheld order on basis of new ground which was available to Addl. CIT but which had not been taken by him. Tribunal held that change in constitution of firm which had taken place when instead of 10 partners and 4 minors admitted to benefits of partnership, firm came to be differently constituted by 11 partners and three minors admitted to benefits of partnership. order, thus, passed by Tribunal had been disapproved by Hon'ble Punjab and Haryana High Court in its abovementioned decision. According to Hon'ble High Court, Tribunal hand no justification in investing new ground which never formed basis of order passed by CIT. Thus, according to Hon'ble High Court it amounted to sharing to exclusive jurisdiction of CIT under s. 263 which was not permissible under law. In total contradistinction to facts found in case of Jagadhri Electric Supply Industrial Co. (supra) we find in present case that correct facts had been withheld from ITO and CIT and since these facts were for first time stated before Tribunal as per papers contained in paper book at pages 77 to 85, it cannot be said that while upholding finding of CIT that expenditure on so-called commission was inadmissible for weighted deduction under s. 35B, Tribunal is sharing exclusive jurisdiction of CIT to act under s. 263 or that it is approving order of CIT on ground which was available to CIT and which had not been made basis of his order. CIT could not have possibly taken ground of disallowing claim which we are taking now on so-called commission as facts had been incorrectly stated before him or had been withheld from him. In present case, expenditure on 'commission' was in fact expenditure on certification of goods and since that was not eligible for weighted deduction under s. 35B in any one of three assessment years, we would uphold finding of CIT withdrawing allowance wrongly granted by ITO. Even if expenditure was on commission for procuring orders for exports (which in fact it was not), CIT would be justified in invoking his powers under s. 263 and proceeding to withdraw allowance wrongly granted by ITO in accordance with one and only one High Court's decision Southern Sea Foods (P) Ltd.'s case (supra) - which was available to him and in which it had been held that commission for procuring orders from foreign buyers was not admissible deduction under s. 35B. Be that as it may in present case facts found clearly show that expenditure of Rs. 2,97,438, Rs. 3,32,939 and Rs. 1,91, 19 3 incurred in asst. yrs. 19 79-80, 19 80-81 and 19 81-82, was not eligible for weighted allowance under any one of clauses of s. 35B (1) (b) as these existed on statute book in three assessment years. We would, therefore, uphold identical orders passed by CIT in this regard and according to us while we do so we are acting in accordance with provisions of s. 254(1) of Act without in any way not following order in Jagadhari Electric Supply & Industrial Co.'s case (supra) where facts were materially different. Even though learned authorised counsel of assessee has been persistently contending all along before us that abovementioned items of expenditure by way of payments made to Banaras House Ltd. were not inspection fees for certification charges in respect of shipments of goods sent abroad but were service charges in connection with exports or charges for advertisement and publicity of assessee's goods abroad, we are not prepared to accept his ipse dixit in face of specific certificate issued by Banaras House Ltd., one of which stands reproduced in earlier portion of order and which clearly shows that expenditure was incurred in order to get goods inspected by Banaras House Ltd. In above view of matter, orders passed by CIT withdrawing weighted deduction on so-called commission expenses are upheld. Rent : 10. In respect of expenditure on rent, ITO had while assessing total incomes in three assessment years allowed weighted deduction on 75 per cent of expenses incurred. CIT examined details of rent paid space- wise and found that most of accommodation had been utilised by assessee in respect of its manufacturing activity. He had accordingly held that expenditure to extent of 30 per cent only was eligible for weighted deduction. learned authorised counsel of assessee has furnished before us at page 75 of paper book space-wise utilisation of premises which had been taken on rent. We find that nearly 70 per cent of accommodation in basement to ground floor and first to fourth floor had actually been utilised in manufacture of garments and making them ready for export. In these circumstances, finding of CIT that weighted deduction on rent had been excessively allowed by ITO was justified. It had been contended by learned authorised counsel of assessee that in asst. yr. 19 78-79 when also action had been taken by CIT under s. 263, weighted deduction had been granted at 75 per cent of expenditure on rent. We find from order passed by ITO in that year that there was no discussion regarding extent of rent which was eligible for weighted deduction. In order passed by CIT under s. 263 also there is no discussion in this regard. In three impugned orders, CIT has given cogent reasons for restricting allowance of weighted deduction on rent to extent of 30 per cent. We would agree with findings given by him and uphold his orders in that regard also. findings given by him and uphold his orders in that regard also. Electricity and water charges : 11. Allowance of weighted deduction on electricity/water charges had been granted by ITO to extent of 80 per cent in asst. yrs. 19 79-80 and 19 80-81. In asst. yr. 19 81-82, no allowance had been granted in respect of expenditure on electricity/water charges and we are given to understand that in that assessment year assessee had not raised any objection against ITO's order not allowing any weighted deduction in respect of electricity expenses. CIT found that weighted deduction granted by ITO to extent of 80 per cent of expenditure was excessive. Having regard to fact that most of electricity had been consumed in process of production of garments, he held that deduction was allowable to extent of 30 per cent of expenses which could at best be related to assessee's activity of export. No fault can be found with this finding of CIT in asst. yrs. 19 79- 80 and 19 80-81. Car expenses : 1 2 . In three assessment years under appeal, ITO had allowed weighted deduction to extent of 50 per cent on car expenses. We find that in asst. yr. 19 78-79 when CIT had fixed weighted allowance in respect of car expenses at 25 per cent in order passed under s. 263, assessee had not objected to order passed by him. In three assessments under appeal CIT has directed grant of allowance at 25 per cent of car expenses. We do not see any infirmity in weighted allowance thus fixed by CIT. Export expenses : 1 3 . In respect of export expenses, ITO had while making assessment orders for asst. yrs. 19 79-80 to 19 81-82 granted weighted allowance under s. 35B at 100 per cent of expenses. CIT examined details of these expenses and found that these included expenditure relating to carriage of goods, preparation of export documents, opening of L. C. s and transfer charges, etc. Since such expenses did not fall within any one of categories of expenses mentioned in provisions of s. 35B (1) (b), CIT was justified in estimating that 50 per cent of export expenses only were eligible for weighted deduction. Here once again, in absence of any material to show that view taken by CIT was erroneous, we would uphold order passed by CIT. 14. Now we shall deal with those contentions of learned authorised counsel which he raised on authority of decisions in Mettur Beardsell Ltd. (supra), Bharath Skin Corpn.'s case (supra) and Industrial & General Products' case (supra). decision in Mettur Beardsell Ltd.'s case (supra) is decision of Special Bench of Tribunal and it had been held therein that decision of Hon'ble Madras High Court in case of Southern Sea Foods (P) Ltd. (supra) does not overrule Special Bench decision of Tribunal in case of J. H. & Co.'s case (supra). We do not have any difference of opinion with above finding of Special Bench of Tribunal. What we have in fact held while deciding eligibility of weighted deduction under s. 35B in respect of so- called commission expenses is that those expenses were in fact incurred by way of certification charges or inspection fees an, therefore, inadmissible for weighted allowance as per law laid down by Special Bench in case of J. H. & Co. (supra). We have also held that those expenses are not eligible for weighted deduction as they do not fall in any one of categories of expenses prescribed in provisions of s. 35B (1) (b) as these prevailed in asst. yrs. 19 79-80 to 19 81-82. We have also held that decision in case of Southern Sea Foods (P) Ltd. (supra) being only one decision of Hon'ble High Court which was available to CIT, he was justified in disallowing weighted deduction on expenses under head 'Commission' in case those were incurred for purposes of procuring order from foreign buyers. In these circumstances, we do not see as to how decision in Mettur Beardsell Ltd.'s case (supra) advances case of assessee. decision in Bharath Skin Corpn.'s case (supra) is another decision of Special Bench of Tribunal in which it was held that commission paid by assessee in that case to State Trading Corpn. for services rendered by way of obtaining market information abroad and fixing up of foreign buyers was eligible for weighted deduction under s. 35B. This case also does not in any way help case of assessee. We would have also allowed weighted deduction on expenditure described as 'commission' in case it was for obtaining market information and for rendering other services which fall under specified categories of s. 35B (1) (b). Since we have found as fact on basis of evidence produced by assessee itself that expenditure described as commission was in fact nothing but inspection fees paid in respect of shipments we have held it to be inadmissible under provisions of s. 35B. This decision of Special Bench of Tribunal relied upon by learned authorised counsel of assessee cannot, therefore, be said to be of any assistance to assessee. In third decision of Tribunal in Industrial & General Product's case (supra) on which reliance had been placed by assessee, it have been held that CIT would not be justified in exercising jurisdiction under s. 263 for merely adopting approach which was different from approach of ITO. In present case what CIT found was that orders made by ITO in asst. yrs. 19 79- 80 to 19 81-82 were erroneous and prejudicial to interests of Revenue insofar as allowances had been granted under s. 35B which were either excessive or which were not due to assessee under s. 35B (1) (b). ratio of decision of Tribunal in Industrial & General Product's case (supra), therefore, also does not help case of assessee at all. 15. In conclusion, we would hold that none of grounds which hadbeen preferred by assessee in three assessment years are tenable. orders passed by CIT are upheld in all three assessment years. jurisdiction was properly assumed by CIT and only one thing which can b e said about orders passed by CIT is that he was lenient in granting certain deductions in asst. yr. 19 81-82 which were not in fact due to assessee under amended law. Since we have no powers of enhancing assessment, we have left orders passed by CIT unaffected in asst. yr. 19 81-82. 1 6 . For abovementioned reasons all three appeals filed by assessee are rejected. *** ALLIED EXPORT INDUSTRIES v. INCOME TAX OFFICER
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