Dipak Kumar Sen, J. - (1.) The material facts found or admitted or as are matters of record in this reference are, inter alia, that Duncan Brothers & Co. Ltd., the assessee, entered into a contract in writing dated August 14, 1969, with one Economic Trading of Cairo for shipment of 3,719 bales of hessian cloth of a specified size. It was a term of the said contract that shipment would be made by a vessel nominated by the foreign purchaser to be ready in the second half of September, 1969. It was further provided that in case of failure of the assessee to ship the goods within the stipulated time, the foreign purchasers would be entitled to cancel the contract or demand appropriate late shipment penalty from the assessee. It was further provided that in case the shipment was delayed for reasons beyond the control of the assessee, the aforesaid provisions will not apply.
(2.) The assessee failed to ship the goods in September, 1969. The shipments were actually made during January, February, March and May, 1970. On the claim of late shipment penalty by the foreign purchaser, a dispute arose between the parties which was referred to the arbitration of the Bengal Chamber of Commerce and Industry. An award was passed in the proceedings on May 31, 1971, under which a sum of Rs. 3,01,239 was awarded in favour of the foreign purchaser. The assessee was directed to pay the said amount to the foreign purchaser. With the approval of the Reserve Bank of India, the assessee paid the said amount of Rs. 3,01,239 to the foreign purchaser in foreign currency.
(3.) In the assessment year 1972-73, the corresponding accounting year ending on December 31, 1971, the assessee was assessed to income-tax. In the assessment, the assessee claimed export markets development allowance under Section 35B of the Income-tax Act, 1961. Weighted deduction of a portion of the said sum of Rs. 3,01,239 was claimed. The Income-tax Officer held that the assessee was not entitled to such weighted deduction on account of export markets development allowance under Section 35B and disallowed the claim.;