COMMISSIONER OF INCOME-TAX vs. JAYANT EXTRACTION INDUSTRIES

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ITR/214/1986HC GujaratGJHC24010838198605 July 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages

AI SummaryRemanded

What did the High Court hold?

The High Court declined to answer the question referred to it. The Court noted that while the ITAT had granted weighted deduction under Section 35B(1)(b)(viii) based on the case of CIT vs. Vippy Solvex Products Pvt. Ltd., the items of expenditure in the present case (port shipment interest and foreign exchange commission) were different from those considered in the cited precedent. Crucially, the Court found no evidence on record to establish that the expenditure was incurred for services performed outside India, which is a specific requirement of Section 35B(1)(b)(viii). The Court emphasized that the burden to prove this lay with the assessee. As it was not possible to opine on whether the items fell within Section 35B(1) due to the lack of necessary evidence and factual matrix, the High Court directed the ITAT to decide the controversy afresh after bringing the necessary evidence on record, providing an opportunity to both sides, and passing a reasoned order.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, referred a question of law to the High Court of Gujarat concerning the grant of weighted deduction under Section 35B(1)(b)(viii) of the Income Tax Act, 1961. The assessment years involved were 1977-78, 1978-79, and 1979-80. The expenditure in dispute for these years was Rs. 4,21,247/- (port shipment interest for 1977-78), Rs. 3,55,128/- (foreign exchange commission for 1978-79), and Rs. 1,39,929/- (foreign exchange commission for 1979-80). The ITAT had allowed the weighted deduction, relying on the case of CIT vs. Vippy Solvex Products Pvt. Ltd. The Revenue appeared through counsel, while the assessee, Jayant Extraction Industries, was served but did not appear.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in granting relief on export interest claimed for weighted deduction u/s.35B(1)(b)(viii) of the I.T.Act,1961? Assessee's contentions: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT had granted relief based on the expenditure being eligible for weighted deduction. Revenue's contentions: The Revenue contended that the expenditure in question, specifically port shipment interest and foreign exchange commission, did not fall within the scope of Section 35B(1)(b)(viii), which relates to expenditure incurred for services performed outside India. The Revenue argued that the ITAT's reliance on CIT vs. Vippy Solvex Products Pvt. Ltd. was misplaced as the facts in that case were different. The Revenue also noted that the assessment orders had observed that the items did not fall within any sub-clause of Section 35B(1).

Which sections of the Income-tax Act were involved?

Section 35B(1)(b)(viii), Section 35B(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 214 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

Whether it is to be circulated to the Civil Judge? : NO --------------------------------------------------------------

COMMISSIONER OF INCOME-TAX Versus JAYANT EXTRACTION INDUSTRIES -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 214 of 1986 MR BB NAYAK FOR MR MANISH R BHATT for Applicant. SERVED BY RPAD - (N) for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE D.A.MEHTA

Date of decision: 05/07/2001

ORAL JUDGEMENT (Per : MR.JUSTICE D.A.MEHTA) 1 The Income Tax Appellate Tribunal, Ahmedabad Bench 'A' has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in granting relief on export interest claimed for weighted deduction u/s.35(B)(1)(b)(viii) of the I.T.Act,1961 ?"

2 On behalf of the applicant Mr.B.B.Nayak has appeared and there is no appearance on behalf of the respondent though served.

3 The assessment years under consideration are assessment years 1977-78, 1978-79 and 1979-80. Though the Tribunal has stated that "export interest" is entitled to weighted deduction u/s.35B(1)(b)(viii) of the Income-tax Act,1961, we find that for each of the years under consideration different items are involved. The details as are available from the respective assessment years are :

-------------------------------------------------------- Assessment Amount. Nature of Expenditure. Years. --------------------------------------------------------

1977-78 4,21,247/- Port shipment interest.

1978-79 3,55,128/- Foreign Exchange Commission.

1979-80 1,39,929/- Foreignh Exchange Commission. --------------------------------------------------------

The Tribunal has in its consolidated order Officer to allow weighted deduction u/s.35B(1)(b)(viii) of the Act. We have gone through the decision of Madhya Pradesh High Court which has been referred to and followed by the Tribunal and we find that the items with which the Madhya Pradesh High Court was called upon to deal with are different from the items which we are called upon to decide. Further more, sub-clause (viii) of section 35B(1) specifically relates to expenditure incurred towards performance of service outside India. We do not find anything on record to show whether the expenditure in question for any of the years under consideration was incurred for any service performed outside India. Prima facie, burden to establish this would be on the assessee making the claim. In the assessment orders also, we find that in relation to items under consideration it has been observed that they do not fall within any of the sub-clause of section 35(B(1) of the Act.

In view of this factual matrix it is not possible for us to opine as to whether items in question fall within either sub-clause (viii) or any other sub-clause of section 35B(1) of the Act. Hence, we decline to answer the question referred to us. The Tribunal is directed to decide the controversy afresh after bringing the necessary evidence on record and giving opportunity to both the sides and pass a reasoned order.

The Reference is disposed of accordingly with no order as to costs. (A.R.Dave, J) (D.A.Mehta, J)

m.m.bhatt

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