Law: Income Tax Act, 1961

Section: 40c

(a) Income-tax----Business expenditure---Company---Disallowance of expenditure above prescribed ceiling---Expenditure resulting in benefit or amenity to director or person substantially interested in company---Medical reimbursement must be taken into account in calculating ceiling---Indian Income Tax Act, 1961, S.40(c). (b) Income-tax--- Export markets development allowance---Weighted deduction-Scope of S.35B-Interest on packing credit, inspection agency fee paid in India and expenditure on obtaining certificate of origin in India--­Not entitled to weighted deduction---Indian Income Tax Act, 1961, S.35B---[Union Carbide India Ltd. v. CIT (1987) 165 ITR 558 (Cal.,) dissented from]. While arriving at the ceiling under section 40(c) of the Income Tax Act, 1961, the reimbursement of medical expenses should be taken into account. Rane (Madras) Ltd. v. CIT (1995) 212 ITR 583 (Mad.) fol. Weighted deduction is available to the assessee under any, of the heads mentioned in clause (b) of section 35B(1) of the Act, only in so far as the expenditure relates to the development of export market. The weighted deduction that can be claimed under this section is not available for the actual sales, but is meant for enabling the assessee to claim additional benefit. Sub-clause (vi) of section 35(1)(b) refers to the expenditure incurred wholly and exclusively on "furnishing to a person outside India samples or technical information for the promotion of the sale of such goods, services or facilities". This sub-clause refers to the furnishing of samples of goods and not the actual sale of the goods. It refers to technical information not in general, but technical information for the purpose of the promotion of the sale of goods, services and facilities. The words "technical information cannot be read in isolation". It is only such technical information as is provided for the promotion of the sale of the goods, services and facilities that can be considered under the provision. Held, (i) that the assessee was not entitled to claim the benefit of section 35B of the Act in so far as the interest paid by it on packing credit was concerned. Lucas TVS Ltd. v. CIT (1996) 217 ITR 382 (Mad.)…

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