Law: Income Tax Act, 1961

Section: 256(2),35B(1)(b)

Section 35B of the Income-tax Act, 1961 - Export market development allowance - Assessee-company, engaged in business of export of coir products, claimed weighted deduction under section 35B in respect of interest on packing credit - Bank certificate showed that advance was given to assessee for purchasing raw materials for manufacturing/processing coir products to be exported out of India - Whether expenditure in order to qualify for weighted deduction is required to have been incurred wholly and exclusively on performance of services outside India in connection with, or incidental to, execution of any contract for supply outside India of such goods - Held, yes - Whether since expense was linked with manufacture of goods, as loan was availed of for purchase of raw materials and not for supply of goods, assessee was not entitled to weighted deduction claimed - Held, yes FACTS The assessee was a limited company engaged in the business of export of coir products. It claimed weighted deduction under section 35B in respect of interest on packing credit. The Assessing Officer and the Commissioner (Appeals) did not allow the claim. On second appeal before the Tribunal, that claim was allowed. On reference, the assessee submitted that interest paid on packing credit was for the purpose of manufacture of articles to be exported on the basis of pre-existing orders and therefore, the amount clearly qualified for deduction. HELD The expenditure referred to in clause (a ) of section 35B(1)(b) has to be of the nature stipulated in the provision itself, i.e., it must have been incurred wholly and exclusively on performance of services outside India in connection with or incidental to, the execution of any contract for the supply outside India of such goods, services or facilities. From the certificate of the bank itself, it was obvious that the advance was given only for the purpose of purchasing raw materials for manufacturing/processing coir products to be exported out of India. The expenditure in order to qualify for weighted deduction is required to have been incurred wholly and exclusively on performance of services outside India in connection with, or incidental to,…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492