Law:

Section:

Section 35B(1)(b)(viii) [as it stood prior to 1-4-1981] of the Income-tax Act, 1961 - Export markets development allowance - Assessee-company had paid interest to a bank on export packing credit account and it was clear from certificate issued by said bank that these credits were given for purchase of raw material for manufacturing goods to be exported outside India and that this credit was only given when contract for supply of goods to foreign parties was shown - Whether weighted deduction qua such interest was allowable under section 35B(1)(b)(viii) as this expenditure was incurred in connection with execution of a contract for supply of goods outside India - Held, on facts, yes Facts The assessee-company claimed certain amount as a weighted deduction under section 35B(1)(b)( viii) on account of, inter alia, interest paid to bank on export packing credit account. The ITO accepted the assessee's claim and allowed one-third of that amount under section 35B(1)(b)( viii). The Commissioner, however, exercising his jurisdiction under section 263, held that the ITO wrongly allowed weighted deduction on the amount of interest paid to bank on export packing credit account. On appeal, the Tribunal, however, found (i) that the assessee paid said interest for promoting export sales, (ii) that the assessee had furnished a certificate from the said bank stating that the assessee had maintained with it an export packing credit loan account and advances in this account were given only for purchase of raw materials for manufacturing goods to be exported outside India and these advances were made available only when the assessee submitted a copy of the export contract with the foreign parties, and (iii) that this account was quite a different one from the normal cash credit account. The Tribunal observed that the findings stated in the said certificate furnished by the bank were never challenged either by the ITO or by the Commissioner. It, accordingly, held that the order of the Commissioner was wrong in law and the assessee was entitled to weighted deduction as claimed. On appeal: Held Section 35B(1)(b)( viii) contemplates expenditure incurred in connection with the…

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