Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue, the following question of law for the assessment year 1982-83 has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to deduction of the entire expenditure of Rs. 12,54,382 under rule 6AA of the Income-tax Rules which was inserted with effect from 1st August, 1981, and not of Rs. 5,75,392 on pro rata basis for the period 1st August, 1981, onwards ?"
(2.) Shortly stated, the facts are that the assessee-company filed a return for the assessment year 1982-83 (previous year being calendar year 1981) declaring loss of Rs. 21,04,910 on June 25, 1982. The claim of loss was enhanced to Rs. 22,60,350 in the revised return. The assessee also claimed weighted deduction under Section 35B of the Income-tax Act; in particular, it claimed deduction of Rs. 12,54,382 expended on maintenance of a warehouse outside India. Under Clause (ix) of Section 35B(1)(b) of the Income-tax Act, weighted deduction is also permissible on expenditure incurred wholly and exclusively on such other activities for promotion of sale outside India of goods, etc., as may be prescribed. In exercise of the power given under the above Clause, rule 6AA was framed and brought into force through the Income-tax (Eighth Amendment) Rules, 1981, with effect from August 1, 1981. Clause (b) of the above rule 6AA provided as under : "Maintenance outside India of a warehouse for the promotion of the sale outside India of such goods."
(3.) The Assessing Officer was of the view that as the said rule came into force with effect from August 1, 1981, the assessee was entitled to deduction for five months, i.e., from August 1, 1981, to December 31, 1981, and not for the period earlier to August 1, 1981. He accordingly, allowed deduction on a proportionate basis for five months amounting to Rs. 5,22,659 out of the total claim of Rs. 12,54,382 for the whole period.;