IMPORTANT POINT
In order to avail the benefit of weighted deduction u/s 35B of the Income Tax Act it is not necessary that the export should be directly ex-India (from India).

JUDGMENT

Syed Shah Mohammed Quadri, J.-In these five appeals the parties are common; the Revenue is the appellant and the assessee is the respondent. C.A. Nos. 2600-03 of 1994, which relate to the assessment years 1967-68 to 1970-71, arise from the judgment and order of the Division Bench of the High Court of Judicature at Bombay in Income-Tax-Reference No. 242 of 1976 dated December 12, 1988. Following that judgment the Division Bench disposed of Income Tax Reference No. 10 of 1987 which pertains to the assessment year 1974-75 on July 30, 1998 which is under challenge in Civil Appeal No. 3788 of 1999. The common substantial question of law, which arises in these appeals, is question No. 2 noted below.

2. Briefly stated, the facts giving rise to these appeals are as follows : The respondent-assessee is an Indian resident company. It is carrying on the business of exporting tea. In the aforementioned assessment years it claimed weighted deduction under Section 35-B of the Income-tax Act (for short the Act ) in respect of the expenditure of Rs.1,95,935/ incurred on export of tea from East Africa to the United Kingdom. The claim was disallowed by the Income-tax Officer on the ground that Section 35-B would apply only if the exports were made from India. That view was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. Among others, the following two questions in Income Tax Reference No. 242 of 1976 and question No. 2. In Income Tax Reference No. 10 of 1987 were referred to the High Court of Judicature at Bombay by the Income-tax Appellate Tribunal under Section 256(1) of the Act :

"(1) Whether on the facts and in the circumstances of the case, the provisions of Section 40(c)(iii)/40(a)(v) applied in the case of the employees of the Assessee in its overseas branches?

(2) Whether on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under Section 35-B in respect of the expenditure of Rs.1,95,935/- incurred on export of tea from East Africa to the United Kingdom?"

3. The first question was answered in the negative i.e. in favour of the assessee and against the Revenue following the judgment in the case of the respondent-assessee for the earlier assessment years in Bombay Burmah Trading Corporation Ltd. v. Commissioner of Income-tax, Bombay City-IV1. It is conceded by the learned counsel for the parties that this question is covered against the Revenue by the judgment of this Court in Commissioner of Income Tax v. Continental Construction Ltd.2 affirming the judgment in Continental Construction Ltd. v. Commissioner of Income Tax3.

4. Adverting to the second question, the High Court answered it in the affirmative i.e. in favour of the assessee and against the Revenue. It will be apt to refer to Section 35-B of the Act, which is the subject-matter of debate in all the five appeals.

"35-B. Export Markets developments allowance.-(1)(a) Where an assessee, being a domestic company or a person (other than a company) who is resident in India, has incurred after the 29th day of February, 1968, but before the 1st day of March, 1983, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in clause (b), he shall, subject to the provisions of the section, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year;

(b) The expenditure referred to in clause (a) is that incurred wholly and exclusively on-

(i) advertisement or publicity outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business......;

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(viii) performance of services outside India in connection with, or incidental to, the execution of any contract fo