Vildirect: IncomeTax-caselaws-1981-VIL-14-ITAT-AHM

1981-VIL-14-ITAT-AHM

Equivalent Citation: ITD 002, 454, TTJ 014, 552,

Income Tax Appellate Tribunal AHMEDABAD

Date: 28.09.1981

GUJARAT OIL AND ALLIED INDUSTRIES.

INCOME TAX OFFICER.

BENCH

Member(s) : P. K. MEHTA., K. R. DIXIT.

JUDGMENT

Per Shri K. R. Dixit, Judicial Member --- The assessee in this case has claimed weighted deduction under section 35B of the Income-tax Act, 1961 ('the Act'). The first claim is in respect of brokerage paid on sales outside India. The ITO has disallowed it and the Commissioner (Appeals) has also disallowed the same on the ground that the assessee's representative was not able to produce any evidence before him to show that the brokerage had been paid in respect of services rendered outside India by the person concerned. Before us the assessee had produced a copy of the letter dated 7-3-1979 written by him to the ITO, therein he had stated that for the purpose of the export business he had to engage a commission agent who did the work in connection with the export of goods such as (i) finding out the buyers from foreign countries, (ii) getting information regarding market and rate, (iii) preparing of tenders and contract, (iv) shipment work, and (v) fixing the date of shipment. He has also stated to us that he had produced before the ITO the bills of the commission agent. According to the decision or the Full Bench in the case of J. Hemchand & Co., weighted deduction commission is allowable. We, therefore, allow the same.

2. The assessee has claimed weighted deduction in respect of expenditure of Rs. 1,91,481, being expenditure on de-cake quality allowance. The ITO has rejected the claim and the Commissioner (Appeals) has confirmed the rejection on the ground that on a perusal of the relevant contract the quality allowance is actually reduction in price for the inferior quality of the goods. Before us the assessee had contended that this is a liquidated damages paid to the purchaser and, therefore, it is an expenditure in respect of exports. We are unable to accept the contention of the assessee. A copy of the contract with the foreign purchaser has been produced before us. Under the terms and conditions thereof the following appears: "Quality allowance---There shall be an allowance to buyers on the following rates: (i) for any deficiency of oil and albuminoids below fifty per cent, (ii) for any excess of fibre over fourteen per cent, (iii) for any excess of sand and/or silica over two and a half per cent, (iv) for any excess of moisture over ten per cent, (v) for any castorseed and/or castorseed husk contents."

The above term clearly shows that the quality allowance is nothing but a deduction in price given to the buyer for inferior quality of the goods supplied. Therefore, no question of claiming any weighted deduction in respect thereof arises. The Commissioner (Appeals)'s order on this point is, therefore, confirmed.

3. The assessee has claimed weighted deduction in respect of an expenditure of Rs. 4,365, being expenditure on purchase of quota slips. He has sought to support his claim on the basis of clause (viii) of section 35B(1)(b). However, under that clause expenditure must be in respect of performance of services outside India, and, therefore, this claim is not tenable.

4. The ITO has rejected the assessee's claim for relief under section 80J of the Act, to the extent of Rs. 38,500. The ITO has rejected this claim on two grounds:

1. That the machinery of the assessee included some old machinery and plant. According to him, even after deducting depreciation for the assessment year 1975-76 the value of old machinery would be in excess of the total value of machinery and plant as required under section 80J and thus the deeming provision in Explanation 2 to the section is not applicable in this case.

2. Under sub-section (6A) of section 80J it was mandatory that the assessee should have furnished along with his return a report on the audit of the accounts duly signed and verified by the accountant. The assessee had failed to do so.

The Commissioner (Appeals) has not considered ground 1 on which the ITO had disallowed the claim. He has confirmed the ITO's order on the basis of ground 2.

5. Before us the assessee's representative has contended that this is merely a procedural provision and should not be construed strictly. For this purpose he had relied on the decision of the Gujarat High Court in CIT v. Kaira District Co-operative Milk Producers' Union [1979] 116 ITR 319. In that case the court was concerned in interpreting rule 19 of the Income-tax Rules. It held that if on construing that rule the court found that the main object and purpose of section 84 is thwarted by an apparently plain or literal reading, it must read the rule in such a manner as to avoid manifest absurdity, apparent injustice and irrational or absurd conclusion, so that the object and purpose of the main enactment could be effectuated fully. In the present case the audited accounts were filed on or before 7-3-1979 and the assessment order has been perused on 18-9-1979. Therefore, the report was before the ITO when he passed the assessment order. It appears to us that the purpose of the said sub-section (6A) is to enable the ITO to make his assessment on the basis of audited accounts. Therefore, it would be necessary that the audit report should be filed with the return on the same date. The words 'along with' in that sub-section merely means that audit report should also be furnished, so that it is available to the ITO at the time of the assessment. In that view of the matter we feel that the Commissioner (Appeals) should not have rejected the assessee's claim before going into the merits thereof. We, therefore, restore this matter to the Commissioner (Appeals)'s file so that he may consider the assessee's claim on merits and pass an order according to law.

6. The assessee has not pressed his ground No. 6 in respect of disallowance of telephone expenses. It is, therefore, rejected.

7. In the result, the appeal is partly allowed.

Per Shri P.K. Mehta, Accountant Member --- I will like to bring some facts and make some observations about relief under section 80J, which issue is dealt with by my learned brother in paras 4 and 5 of his order. In the instant case, the return of income unaccompanied by the audit report referred to in section 80J(6A) was filed, as per the assessee's authorised representative, on 29-6-1976 and the requisite audit report, according to him, was submitted before the ITO on 27-1-1979. The assessment order was passed on 18-9-1979. The provisions of sub-section (6A) of section 80J do not provide for the situation about belated filing of audit report or the condonation of delay. In this case, the delay is of little less than 212 years. It is also well settled that to obtain a particular benefit the assessee must fulfil all the pre-conditions laid down in law. However, in the instant case my learned brother has taken a view of the relevant provision which is favourable to the assessee and, therefore, I will like to agree with him.

2. I agree with the conclusions of my learned brother on all the points dealt with in his order.

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