Law:

Section:

Income-tax----Export markets development allowance---Weighted deduction---Burden of proof---Interest on post-shipment loans---Professional charges for designing for undertaking export contract---No evidence that expenses fell within clause (viii) of S.35-B(1)(b)---Expenses not entitled to weighted deduction--¬Indian Income Tax Act, 1961, S.35-B. In order for an expenditure to fall under clause (viii) of section 35-B(1)(b) of the Income-tax Act, 1961, it must be (i) an expenditure incurred wholly and exclusively on the performance of services outside India; (ii) the services should be in connection with or incidental "to the execution of any contract for the supply outside India of such goods, services or facilities" which the assessee deals in or provides in the course of his business. It is for the assessee who claims deduction under, section 35-B(1) to satisfy the authorities by producing requisite material that the particular expenditure was covered by any of the sub-clauses of clause (b) thereof. In the event of his failure, no weighted deduction can be allowed to him. Held, (i) that expenditure was incurred by way of interest on loans obtained by the assessee from the banks in India for the purposes of its business. It had nothing to do with performance of any service outside India in connection with the contract of supply of goods by the assessee outside India. The fact that the amount of loan was utilized for giving deferred payment facilities to the foreign buyers will not make it an expenditure incurred on the performance of services outside India. The payment of interest to the banks has no nexus with performance of any service outside India. No material whatsoever was available to show that the expenditure of Rs.20,55,145 was incurred by the assessee on any of the activities speed in sub-clause (viii) of clause (b) of section 35-B(1) of the Act. The Tribunal was right in holding that the assessee was not entitled to weighted deduction under section 35-B(1) of the Act on the interest paid by it to the banks in India and shown in the accounts as "Interest paid on post-shipment loans". (ii) that so far as the amount of Rs.26,100 being the professional…

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