Law:

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Section 35B (omitted with effect from 1-4-1989) of the Income-tax Act, 1961 - Export markets development allowance - Assessment year 1977-78 - Whether assessee is entitled to weighted deduction in respect of expenses on salary and expenses of staff engaged in export sales - Held, yes - Whether, where Commissioner (Appeals) had not given any reason in restricting relief up to 75 per cent of expenditure on salary incurred, Tribunal was justified in affirming order of Commissioner (Appeals) - Held, no [case remanded back] Circulars and Notifications : CBDT Circular dated 28-12-1981 FACTS The assessee paid salary and allowances to staff engaged in export sales in sum of Rs. 43,000 and the assessee's claim for weighted deduction under section 35B in respect of the said amount was negatived by the ITO. On appeal, the Commissioner (Appeals) held that the assessee will be entitled to deduction of 75 per cent of the salary paid to the clerical staff. In further appeal, the Tribunal also confirmed the order passed by the Commissioner (Appeals). The Tribunal relied upon its earlier decision in Kerala Nut Food Co. Ltd. v . CIT [IT Appeal Nos. 333 to 336 (Coch.) of 1981, dated 26-3-1983]. On reference by the revenue: HELD The earlier decision of the Tribunal rendered in Kerala Nut Food Co. Ltd.'s case (supra) came up before the Kerala High Court in Income-tax Reference Nos. 176 to 179 of 1987. The matter was exhaustively reviewed by a Bench of the Kerala High Court and was rendered in the said cases and connected cases [IT Reference Nos. 180 to 187 of 1987, on 2-4-1981]. After referring to the provisions of section 35B, the decision of the Tribunal in J. Hemchand & Co. [IT Appeal Nos. 3255 and 3330 (Bom.) of 1976-77, dated 17-6-1978] and circular of the CBDT dated 28-12-1981, the Kerala High Court held that the decision of the Tribunal rendered in Kerala Nut Food Co. Ltd.'scase (supra )was in accord with the circular issued by the CBDT, dated 26-12-1981, which, in turn, gave effect to substantially the decision of a Special Bench of the Tribunal in J. Hemchand & Co.'scase (supra). It is clear from a reference of clause 3(a) of the Circular aforesaid, that the…

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