The assessee is not entitled to weighted deduction under Section 35B of the Income-tax Act, 1961 for expenses incurred on inspection and supervision of export goods, bank charges paid for export, cost of excise revenue stamps and hundi papers, and miscellaneous expenses incurred in connection with export.

Jai Singh Sekhon, J.

1. The following question has been referred for the opinion of this court by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the assessee :

"Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in holding that no weighted deduction is allowable in respect of inspection and supervision charges, bank charges, cost of excise revenue stamps and miscellaneous expenses and also for 50% of expenditure on stationery ?"

2. A brief resume of facts relevant for disposal of this reference is that the applicant-assessee is a limited company. The controversy relates to the income-tax assessment year 1977-78 for which the relevant previous year ended on March 31, 1977. In the course of the assessment proceedings, the assessee had claimed weighted deduction under Section 35B of the Act in respect of expenditure amounting to Rs. 10,62,723. The Income-tax Officer allowed the claim of the assessee in respect of all the items other than freight expenses, octroi duty, insurance charges, loading and unloading charges and conveyance charges, While doing so, the Income-tax Officer had obtained the prior approval of the Inspecting Assistant Commissioner as envisaged under Section 144B of the Act. The Commissioner of Income-tax finding the said order erroneous and prejudicial to the Revenue served a notice dated September 8, 1980, under Section 263 of the Act and after considering the assessees reply in response to the said notice passed an order directing the Income-tax Officer to revise the assessment while withdrawing weighted deduction in respect of expenditure amounting to Rs. 38,536 comprising the following items :-

- Rs.

(i) Charges paid for inspection and supervision of export goods:23,315

(ii) Bank charges paid for export:6,173

(iii) Cost of excise revenue stamps and hundi papers for export documentation:330

(iv) Cost of stationery used in connection with export:881

(v) Miscellaneous expenditure incurred in connection with export:7,837

3. The assessee challenged this order of the Commissioner of Income-tax before the Tribunal. The claim of the assessee for weighted deduction under Section 35B of the Act was dismissed except in respect of stationery in the light of the Special Bench decision dated June 17, 1978, in I. T. A. Nos. 3255 and 3330 of 1976-77 in the case of J. Hem Chand and Co. The Special Bench had held that the assessee is not entitled to any relief under Section 35B of the Act on the following items : Rs.

(i) Charges paid for inspection and supervision of export goods:23,315

(ii) Bank charges paid for the export :6,173

(iii) Cost of excise revenue stamps and hundi papers for export documentation :330

(iv) Miscellaneous expenses incurred in connection with export:7,837

4. Feeling aggrieved against the said order of the Tribunal, the assessee filed an application under Section 256(1) of the Act for making a reference to this High Court on two points. The Tribunal did not refer the question regarding the jurisdiction of the Income-tax Commissioner under Section 263 of the Act but referred the above referred question for the opinion of this court.

5. Mr. G. C. Sharma, learned senior advocate appearing on behalf of the petitioner, contended that the provisions of Section 35B of the Act were enacted by the Legislature in order to encourage export of goods outside India for earning foreign exchange and thus he maintained that the relief was given by the Legislature on certain items to the assessee-exporter in order to enable him to compete in the foreign market with similar goods manufactured in other countries. Further, he maintained that the expenses incurred by the assessee on the charges paid for inspection and supervision of export goods, bank charges paid for export, cost of excise revenue stamps and miscellaneous expenses incurred in co