. ARAVINDAPARAMILA WORKS vs COMMISSIONER OF INCOME TAX. Supreme Court, 31-03-1999

Court:Supreme Court (India)
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4
PETITIONER:
ARAVINDAPARAMILA WORKS
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX
DATE OF JUDGMENT: 31/03/1999
BENCH:
S.P.Bharucha, R.C.Lahoti
JUDGMENT:
BHARUCHA, J.
The question in this appeal is whether payment of
commission to an agent abroad is maintenance of an agency
within the meaning of Section 35B(l)(b)(iv) of the Income
Tax Act, 1961. The High Courts have taken divergent views.
We are concerned with the Assessment Year 1981-82.
The assessee manufactured agarbathis. It had exported
agarbathis during the year under consideration. It had paid
commission to agents outside India who had procured orders.
It claimed weighted deduction under the afore-mentioned
provision in respect of such expenditure of Rs.l3,23,225/-.
It was disallowed by the Assessing Authority’. The
Commissioner of Income Tax (Appeals) took a contrary view.
The Income Tax Appellate Tribunal held that the
Commissioner (Appeals) was not justified in allowing
the said weighted deduction. From out of the judgment and
order of the Tribunal, the following question was referred
to the High Court for its considerations:
’’Whether on the facts and in tlie circumstances of
the case. the Tribunal was justified in holding that the
applicant was not entitled to the weighted deduction under
S.35B (l)(b)(iv) of the Act. in respect of the commission
payments made to agents outside India?"
The High Court answered tlie question in the
affirmative and in favour of the Revenue, following its
earlier decision in Chief Commissioner of Income Tax vs.
Mysore Sales International Ltd. (195 ITR 457). The
assessee is in appeal by special leave .
Section 35B states that where an assessee. who is
reasident in India, has incurred, directly or in association
with any other person, any expenditure referred to in clause
(b) thereof he would be allowed a deduction of a sum equal
to be one and one-third times the amount of such expenditure
incurred during the previous year. So far as is relevant,
clause (b) reads:
’’the expenditure reterred to in clause (a) is that

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