Bharucha, J. - (1.) The question in this appeal is whether payment of commission to an agent abroad is no maintenance of an agency within the meaning of Section 35-B(1)(b)(iv) of the Income-tax Act, 1961. The High Courts have taken divergent views.
(2.) 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 aforementioned provision in respect of such expenditure of Rs. 13,23,225/-. 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 the circumstances of the case, the Tribunal was justified in holding that the applicant was not entitled to the weighted deduction under S. 35-B(1)(b)(iv) of the Act, in respect of the commission payments made to agents outside India - The High Court answered the question in the affirmative and in favour of the Revenue, following its earlier decision in Chief Commr. of Income-tax v. Mysore Sales International Ltd., (1991) 195 ITR 457. The assessee is in appeal by special leave.
(3.) Section 35-B states that where an assessee, who is resident 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 referred to in clause (a) is that incurred wholly and exclusively on- (i) to (iii) ********** and (iv) maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods, services or facilities; ********** " ;