R.C.LAHOTI,J. - (1.) THIS is a reference under S. 256(1) of the INCOME TAX ACT, 1961, arising out of the asst. year 1974 -75, made at the instance of the Revenue, and seeking the opinion of the High Court on the following question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the assessee is entitled to the weighted deduction on the following expenditure -commission Rs. 10,390, foreign telephones Rs. 2,302, salaries 75 per cent of Rs. 50,754, insurance (ECGC) Rs. 774, sale promotion expenses Rs. 6,300, rent 50 per cent of Rs. 6,000 and printing and stationery 50 per cent of Rs. 5,119 ?"
(2.) IT is not disputed that the assessee is a firm carrying on business in the export of readymade garments, handloom clothes and handicrafts. The assessee claimed weighted deduction under s. 35B by reference to several items of expenditure. Each of them may be dealt with individually. Commission Rs. 10,390 The ITO disallowed this item of expenditure on account of having been incurred in India and not "wholly and exclusively" for the purpose referred to in cl. (b) of Sub -S. (1) of S. 35B. A perusal of the order of the AAC shows that though the commission was paid for export business in India, the same was held to be allowable on account of having been incurred "wholly and exclusively" for export business. It was held allowable under sub -cl. (i) of cl. (b) of Sub -S. (1) of S. 35B because the learned AAC was of the opinion that it was only in the case of sub -cl. (iii) that the expenditure should have been incurred outside India. He directed the ITO to allow the claim.
(3.) THE Tribunal did not deal with this item in detail but allowed the same in view of the Special Bombay Bench of the Tribunal having held it to be allowable. A copy of the order of the Special Bench in the case of J. H. & Co. is available in the paper book. Para. 28 of that order shows that the Special Bench had held the commission paid to parties who brought about the export sales allowable under sub -cls. (i) and (ii) without regard to the fact as to where it was incurred.;