H.M.T. (international) Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
- [p.d. dinakaran, c.j.; v.g. sabhahit, j.] karnataka civil services (appointment on compassionate grounds) rules, 1996 - rule 6(4) -permissibility to make fresh appointment to a different post -compassionate appointment - application for the post of second division assistant - pending consideration of the application, the applicant/respondent completed his degree and became qualified for the post of first division assistant -applicant was appointed as second division assistant and joined to duty - representation by the applicant to consider him for the post of first division assistant - rejection of -writ of mandamus sought to consider the further representation of the applicant to the post of first division assistant - non-consideration of higher qualification at the time of making compassionate appointment - mandamus issued by the learned single judge stipulating time limit -appealed against - held, the authorities cannot ignore the right of the respondent/applicant to claim higher post in view of the applicant possessing higher qualification at the time of giving compassionate appointment - the authorities have overlooked the qualification of the applicant already possessed at the time of his appointment. hence, rule 6(4) is not. the director of municipal administration & ors vs. h.n. guruprasad & anr. applicable to the fact situation - order of the learned single judge is upheld. writ appeal is dismissed with exemplary costs of rs. 10,000/-. - section 35b clearly referred to goods, services or facilities which the assessee dealt in or provided in the course of business. this information the assessee furnished to ship-owners as well as exporters of goods, by reason of which deals were struck and the assessee got brokerage or commission.s.p. bharucha, c.j.1. this reference under section 256(1) of the income-tax act, 1961, raises, at the instance of the assessee, the following question :'whether, on the facts and in the circumstances of the case, the appellate tribunal was right in holding that the assessee was not entitled to weighted deduction under section 35b of the income-tax act in respect of expenditure incurred on the export of goods manufactured by messrs. h. m. t. ltd., on the ground that the assessee was not a dealer in the goods manufactured by messrs. h. m. t. ltd. ?2. the assessment year with which we are concerned is the assessment year 1979-80.3. the assessee is a subsidiary of messrs. h. m. t. ltd. and is engaged in the export of products of h. m. t. ltd. and other allied engineering industries in india. for the assessment year in question, it claimed weighted deduction under section 35b in a sum of rs. 2,24,84,860 and the income-tax officer allowed the claim subject to certain adjustments with which we are nor here concerned. the order of the income-tax officer was found by the commissioner of income-tax to be erroneous and prejudicial to the interests of the revenue within the meaning of section 263. the commissioner of income-tax relied upon the judgment of the madras high court in cit v. kasturi palayacat co. : [1979]120itr827(mad) and observed that when that court said that an assessee exporting goods of another was not entitled to the benefit of section 35b, what was meant was that the goods exported should have belonged to the assessee at the time of export; if not, such an assessee could not be said to have dealt in the goods for being entitled to the weighted deduction under section 35b. the assessee had acted as an agent for the sale of goods belonging to h. m. t. ltd. and had not exported the same on its own account. section 35b did not envisage weighted deduction to an assessee offering assistance to an exporter. accordingly, the commissioner of income-tax set aside the income-tax officer's assessment order and directed him to revise the weighted deduction under section 35b in conformity with his (commissioner of income-tax) observations. the assessee preferred an appeal before the income-tax appellate tribunal. the tribunal said that it had no hesitation in coming to the conclusion that the assessee was not a dealer in the goods manufactured by h. m. t. ltd. section 35b clearly referred to goods, services or facilities which the assessee dealt in or provided in the course of business. therefore, unless the assessee was a dealer in those goods, it could not claim deduction under section 35b. the expression, 'goods, services, etc.', meant that the goods should be dealt with by the assessee as a dealer and that the services should be provided by the assessee in that behalf.4. arising out of the order of the tribunal is the question which we have quoted above.5. section 35b, in so far as it is relevant, reads thus :'35b(1)(a) where an assessee, being a domestic company or a person (other than a company) who is a resident of india, has incurred after february 29, 1968, 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 this 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 : provided that in respect of the expenditure incurred after the 28th day of february, 1973, but before the 1st day of april, 1978, by a domestic company, being a company in which the public are substantially interested, the provisions of this clause shall have effect as if for the words 'one and one-third times', the words 'one and one-half times' had been substituted. (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; (ii) obtaining information regarding markets outside india for such goods, services or facilities; (iii) distribution, supply or provision outside india of such goods, services or facilities, not being expenditure incurred in india in connection therewith or expenditure (wherever incurred) on the carriage of such goods to their destination outside india or on the insurance of such goods while in transit where such expenditure is incurred before the 1st day of april, 1978; (iv) maintenance outside india of a branch, office or agency for the promotion of the sale outside india of such goods, services or facilities; (v) preparation and submission of tenders for the supply or provision outside india of such goods, services or facilities, and activities incidental thereto; (vi) furnishing to a person outside india samples or technical information for the promotion of the sale of such goods, services or facilities; (vii) travelling outside india for the promotion of the sale outside india of such goods, services or facilities, including travelling outward from, and return to, india; (viii) performance of services outside india in connection with, or incidental to, the execution of any contract for the supply outside india of such goods, services or facilities; (ix) such other activities for the promotion of the sale outside india of such goods, services or facilities as may be prescribed.' 6. this section provides that where an assessee has incurred any expenditure referred to in clause (b) thereof he shall be allowed a deduction of a certain fraction of the amount of such expenditure incurred during the previous year. the expenditure referred to in clause (a) is that incurred wholly or exclusively 'in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business.' in so far as goods are concerned, the expenditure must be incurred on goods in which the assessee deals in the course of his business. in so far as services or facilities are concerned, the services or facilities must be those which the assessee provides in the course of his business.7. in the instant case, the assessee engages itself in the export of products of h. m. t. ltd., of which it is a subsidiary. it is difficult to say that the assessee does not, in the course of its business, deal in the goods of h. m. t. ltd., which it helps to export. we don not read in the definition any requirement that the assessee should be the owner of the goods with which he deals in the course of his business for the purposes of receiving the weighted deduction contemplated by the section. this can be looked at in another manner also. the assessee provides in the course of its business services or facilities to h. m. t. ltd., in the export of the latter's goods. looked at even in this manner, the assessee would appear to us to be entitled to the weighted deduction under the section. reliance was placed by the commissioner of income-tax upon the judgment of the madras high court aforementioned (see : [1979]120itr827(mad) ). we find that he has plainly misread the judgment. this was a case in which the kuala lumpur branch of the assessee had purchased goods worth rs. 17,03,999 malaysian dollars; of these goods worth 4,77,802 malaysian dollars had been purchased from parties in india and the balance of goods worth 12,26,197 malaysian dollars had been purchased locally in kuala lumpur. the madras high court held that the assessee was eligible for the allowance of the expenditure mentioned in section 35b provided that the assessee had, in its foreign branch, dealt abroad in indian goods exported from india. if the assessee had made only local purchases abroad, then there would be no scope for allowance of the weighted deduction under section 35b as, to that extent, there were no exports from india. the assessee could not get allowance for some one else's exports of goods from india, but so far as the assessee exported goods from india, even though the assessee did not deal in those goods in india, the assessee was eligible for the allowance, as there was nothing in the provision which required the assessee to deal in those goods in india also before he could get the relief under section 35b in respect of the expenses incurred abroad. this judgment would appear ti support the case of the assessee rather than the case of the revenue.8. our attention was also invited to the judgment of the bombay high court in cit v. orient charterers : [1990]185itr354(bom) (to which one of us was a party). the assessee there was carrying on business as a freight and shipping agent. in the course of and for its business, the assessee had to collect information about the places at which goods were available for export from one country to another and regarding the availability of ships. this information the assessee furnished to ship-owners as well as exporters of goods, by reason of which deals were struck and the assessee got brokerage or commission. the question was whether the assessee was entitled to weighted deduction under section 35b. the court held that it did not find anything in the section which debarred a broker or agent who supplied services or facilities as distinct from goods from getting the deduction under section 35b. the court referred to an earlier judgment dated june 13, 1978, in the income-tax reference no. 375 of 1977 (cit v. indian hotels co. ltd.), where it was held that the assessee whose business was merely to extend facilities and render services was entitled to the deduction under section 35b. this judgment, in our view, supports the alternative ground upon which the assessee is entitled to the deduction under section 35b.9. in this view of the matter, the question that is posed to us is answered in the negative and in favour of the assessee. there shall be no order as to costs.