Rajes Kumar, J. - (1.) At the instance of the revenue, the Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256(2) of the Income Tax Act, 1961, hereinafter referred to as "the Act" for opinion to this Court for the assessment year 1983-84. "Whether on the facts and in the circumstances of the case, the Hon'ble I.T.A.T. was legally correct in reaching the conclusion that the expenditure by way of commission to the Belgium Agent qualified for weighted deduction within the meaning assigned Under Section 35B(1)(b)(iv) of the I.T. Act, 1961?"
(2.) The brief facts of the case are as follows: The assessee opposite party (hereinafter referred to as "the Act") is a partnership firm and carries on the business of manufacture and export of hand knitted woollen carpets. During the accounting period relevant to the assessment year 1983-84 they claimed weighted deduction Under Section 35B(1)(b)(iv) of the Act on the foreign agent's commission amounting to Rs. 4,60,432.60 paise paid to M/s Jack Barouk of Belgium on the count that they had entered into an agreement with the Belgium party under whom the foreign agent was to work for the assessee in the promotion of their exports, for which services a payment @ 5% of the invoice valaue of the exported goods had to be made. The Assessing Officer allowed the deduction. However, the learned CIT, Allahabad vide his order dated 3.2.1986 set aside the assessment order Under Section 263 of the Act for the requisite examination.
(3.) The assessing authority framed fresh assessment and disallowed the claim of deduction under Section 35-B of the Act on the ground that the commission paid to the foreign agent M/S Jack Barouk of Belgium was not covered under Section 35B(1)(b)(iv) of the Act. Aggrieved by the order of the Assessing Authority, appeals filed before the Commissioner of Income Tax (Appeals), which was dismissed. The assessee filed second appeal before the Tribunal, which was allowed. The Tribunal held as follows: "After hearing both the sides and considering the material on record. We found that a similar case as that of the assessee has already decided by the Allahabad Bench in the case of Kothari Carpet Co. v. I.T.O. (supra). In our view, Sub-section (iv) of Section 35-B of the Act permits a deduction in respect of an expenditure incurred wholly and exclusively on maintenance outside India of a branch office or agency. The agency is an expression of which the content has nothing to do with the preceding words "office" or "Branch". Hence it cannot be said that Section 35B(1)(b)(iv) enjoins that the assessee himself has to maintain an office or agency outside India. He can operate through foreign agent. Therefore, while agreeing with the contention of the learned counsel, we allow the deduction as claimed Under Section 35B(I)(b)(iv) of the Act.;