Expenses incurred by an assessee in connection with export business, such as fees paid to the Export Credit Guarantee Corporation, salary of Export Department staff, postage, telephone and trunk-call expenses, and purchase of foreign periodicals, are allowable for export markets development allowance under Section 35b of the Income-tax Act, 1961.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, for the assessment year 1976-77, the following question of law has been referred to this court :"whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the amount of Rs. 75,494 qualifies for deduction under Section 35b of the Income-tax Act, 1961. "

( 2 ) THE assessee claimed export markets development allowance in respect of expenditure of Rs. 8,16,274. According to the Income-tax Officer, these expenses included shipping expenses, bank commission, administrative expenses, salary, postage, etc. He held that except the expenditure of Rs. 1,30,500 incurred on account of foreign travelling, the assessee was not entitled to the allowance under Section 35b.

( 3 ) AGAINST the Income-tax Officer's decision, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals ). Following the Special Bench order of the Tribunal on this issue, he held :"the first item of Rs. 97,942 relating to analysis, weighment, supervision charges, etc. , will be clearly inadmissible. Bank commission relating to the discounting of bills is connected with the early realisation of the price of the goods exported and it does not fall within the admissibility of the clause which disqualifies the amount of Rs. 51,963 for weighted deduction. The amount of Rs. 18,204 relates to Export Credit Guarantee Corporation for their service and will be covered by Sub-clause (ii) and hence includible in the computation for weighted deduction. The amounts of Rs. 3,51,299 and Rs. 58,776 relate to carriage, handling, clearing and forwarding charges which have to come under the specific exclusion by Sub-clause (iii) as elaborately discussed above. These two amounts, therefore, lose the claim for weighted deduction. Similar will be the fate of the amount of Rs. 3,290 relating to port expenses. The amount of Rs. 32,750 has been explained as premium paid on purchase of export quota. It is actually the cost of goods and not an expenditure covered by Section 35b. This will also not enter into the computation under Section 35b. As discussed above, the salary of the staff dealing with export matters has to be allowed on the basis of apportionment. In this regard, in my view, Rs. 40,000 out of the claim of Rs. 54,259, i. e. , about 75 per cent. , should be taken into the computation for allowing weighted deduction. Foreign expenses of Rs. 1,30,500 have already been included by the Income-tax Officer for weighted deduction. The appellant states that the specific items of expenditure on postage, telephone and trunkcall relate to export business and foreign markets which come to Rs. 16,510. Since this apportionment itself has been specifically given from the total expenditure relating thereto which was before the Income-tax Officer right from the assessment stage, this amount of Rs. 16,510 will be included for purposes of weighted deduction. The last item of Rs. 780 relates to foreign periodicals which are subscribed to by the appellant. The amount of Rs. 780 will also be included for weighted deduction. The Income-tax Officer will please revise the calculation of weighted deduction under Section 35b in the light of the above directions in this order. Consequential relief will be available to the appellant. "

( 4 ) ON second appeal, the Tribunal held thus :"we have heard both sides on the issue. The items of expenditure in respect of which the assessee became dissatisfied with the order of the Commissioner of Income-tax (Appeals) have been enumerated hereinabove. The Revenue felt aggrieved with the items, namely, Rs. 18,204 being the fees paid to the Export Credit Guarantee Corporation, salary of Export Department, (sic) Rs. 16,510 being postage, telephone and trunk-call expenditure related to export business and Rs. 780 related to foreign periodicals. In view of the undisputed fact that the Commissioner of In