Law:

Section:

Section 35B of the Income-tax Act, 1961 - Export markets development allowance - Allowability of - Certain expenditure incurred by assessee-company comprised payments made (i) for obtaining information regarding marketability of goods, and (ii) to export credit guarantee corporation for purpose of being apprised of credit-worthiness of foreign buyer and also providing guarantee for payment - Whether impugned items of expenditure fell within purview of sub-clauses (ii) and (viii) respectively of section 35B(1)(b) - Held, yes Facts Certain expenditure incurred by the assessee-company comprised payments made for obtaining information regarding the marketability of goods and to the export credit guarantee corporation for the purpose of being apprised of the credit-worthiness of the foreign buyer and also providing guarantee for the payment. The assessee claimed weighted deduction in respect of the impugned expenditure. The ITO disallowed the assessee's claim. On appeal, the Tribunal allowed the weighted deduction qua the impugned expenditure. On reference: Held Section 35B is obviously intended to give extra deduction for the items of expenditure contemplated therein with a view to give incentive and fillip to export market. This additional deduction over and above the normal deduction under section 37 should be allowed if the expenditure is strictly within the contours of the items of expenditure comprised in clause (b) and if a liberal or stretched interpretation is given the object of giving additional deduction will be defeated. The expenditure relatable to export of goods only is eligible for weighted deduction under section 35B. Sub-clause (ii) contemplates deduction of expenditure for information regarding markets outside India. This is obviously aimed at giving relief in the event of spending the amount for survey of export potential. Therefore, the expenditure incurred by the assessee for obtaining information regarding market potentiality for the goods sought to be put in the stream of export was squarely within the purview of sub-clause (ii). However, insofar as the payment to export credit guarantee was concerned, it was difficult to accommodate the…

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