Ajit K. Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following question of law has been referred to this court for the assessment year 1977-78 : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that, in order to be entitled to weighted deduction under Section 35B(1) of the Income-tax Act, 1961, it is not necessary that the assessee must export the goods or be an exporter and, in that view, remitting the matter to the Income-tax Officer for further enquiry ?"
(2.) Shortly stated, the facts are that Messrs. Project and Equipment Corporation of India Ltd. (hereinafter referred to as "PEC") obtained a contract from a Dubai party for supply of distribution materials in kind of electrical equipment and, on its part, entered into a contract with the assessee-company for supply of these distribution materials to it. Under this contract, PEC was entitled to certain commission. For the assessment year under consideration, the assessee claimed weighted deduction under Section 35B of the Act on the commission of Rs. 6,87,575 paid to PEC. The Income-tax Officer, however, disallowed the deduction because "it is PEC which is making the export but not GEC. So, the commission paid to PEC in this connection will not qualify for deduction under Section 35B". On appeal, the Commissioner of Income-tax (Appeals) allowed the claim of weighted deduction allegedly on the basis of this Tribunal's Special Bench decision in the case of J. H. and Co. v. ITO (1 SCT 150).
(3.) Being aggrieved, the Department preferred an appeal to the Tribunal. During the hearing of the appeal, the departmental representative contended that the assessee-company was not the exporter but PEC was the exporter and as such the assessee-company is not entitled to weighted deduction. Opposing this contention, the authorised representatives for the assessee contended that, in order to be entitled to weighted deduction, it is not necessary for the assessee to be the actual exporter and submitted that the assessee claimed the deduction under Sub-clause (i) or (ii) of Section 35B(1)(b) of the Act, on the strength of the decision of the Delhi Bench of this Tribunal in the case of Ferro Alloys Corporation Ltd. v. ITO [1983] 6 ITD 521. The Tribunal held therein that it was not necessary that "a person to be entitled to the weighted deduction must export the goods or be an exporter. The only criterion fixed is that the assessee must incur the particular types of expenditure mentioned in Clause (b) of Sub-section (1) of Section 35B in respect of the goods etc., which he deals in". As neither the Income-tax Officer made such enquiry nor the "assessee produced any evidence in support of his claim under Sub-clauses (i) and (ii) thereof during the assessment proceedings," the Tribunal remitted the matter to the Income-tax Officer for such enquiry during which the assessee was to lead evidence to show that the conditions enumerated in Sub-clauses (i) and (ii) of Section 35B(1)(b) of the Act had been fulfilled by it.;