Law: Income Tax Act, 1961

Section: 35B

(a) Income-tax-----Export markets development allowance---Weighted deduction Expenditure on maintenance of warehouse in foreign country---Entitled to weighted deduction---Indian Income Tax Act, 1961, S.35-B. (b) Income-tax----Reference---Powers of High Court---Power to reframe question---Indian Income Tax Act, 1961, S.256. The High Court in appropriate cases has power to reframe a question, but it must definitely arise out of the order passed by the Tribunal: Held, (i) that clause (iv) of section 35-B (1)(b) of the Income Tax Act, 1961, refers to allowance for the expenses made towards maintenance outside India of a branch office or agency for the promotion of the sale outside India of such goods, services or facilities. In the instant case, the assessee engaged an agent who maintained a warehouse outside India. The expenses incurred by the agency were reimbursed by the assessee. Before the Assessing Officer the assessee claimed deduction towards expenses made for. maintenance of the agency and this matter was taken up suo motu by the Commissioner of Income-tax who reversed it. The matter came up before the Tribunal also. The Tribunal was to consider whether the expenses made for the maintenance of a warehouse by the agency and later on reimbursed by the assessee were allowable. The Tribunal, after considering the facts and circumstances, allowed the deduction, however, under section 35-B (1)(b)(ix). But the real controversy was, all through from the Assessing Officer level to the Tribunal level, whether the expenses towards maintenance of a warehouse by the agency and later on reimbursed by the assessee were deductible. The Tribunal quoted a wrong section, which was absolutely inapplicable in the present facts and circumstances of the case. The real question ought to have been whether the expenses made towards maintenance of the warehouse by the agency could be deducted from the income. Hence, the question had to be refrained. The question would be whether under the facts and in the circumstances of the case, the assessee would be entitled to get deduction of expenses for maintenance of warehouse outside India under the provisions contained in section 35-B…

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