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Commissioner of Income-tax Vs. J.B. Advani and Company (Mysore) (Private) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberIncome-tax Reference Case Nos. 219 and 220 of 1979
Judge
ActsIncome Tax Act, 1961 - Sections 35B, 35B(1) and 40A(5)
AppellantCommissioner of Income-tax
RespondentJ.B. Advani and Company (Mysore) (Private) Ltd.
Appellant AdvocateK. Srinivasan and ;H. Raghavendra Rao, Advs.
Respondent AdvocateG. Sarangan, Adv.
Excerpt:
- karnataka rent control act, 1961.[k.a. no. 22/1961]. section 3(r): [subhash b. adi, j] tenant - held, a person whose tenancy in terminated continues to be a tenant. -- sections 8 & 9 & schedule - clause 4: suit for ejectment and suit for possession - cognizance by small causes courts - held, a person as a tenant could be ejected and appropriate court is that of small cause where the rent payable in only 500/- p.m. .....:i.t.r. c. no. 219 of 1979 : question no. 1: answered in the affirmative, in favour of the assessee and against the revenue. i. t. r. c. no. 220 of 1979 : question no. 1: answered in the affirmative, in favour of the assessee and against the revenue. question no. 2: answered in the affirmative, in favour of the assessee and against the revenue. 16. but, in the circumstances of the cases, we direct the parties to bear their own costs.
Judgment:

K.S. Puttaswamy, J.

1. As parties in these cases are common and one of the questions that arises for determination is common, we propose to dispose of them by a common order.

2 Messrs J. B. Advani & Company (Mysore) (Private) Limited, Bangalore, which is the common assessee in these cases, is inter alia engaged in the manufacture of electronic equipments such as chokes, amplifiers and T. V. antennas at its factory situated at Nasik and distribution of newsprint paper, electrodes and export of coffee, tea and pepper.

3. For the assessment years 1975-76 and 1976-77 relevant to the accounting years ending on March 31, 1975 and March 31, 1976 respectively, the assessee filed its returns before the Income-tax Officer, Company Circle-I, Bangalore, inter alia, claiming sums of Rs. 8,881 and Rs. 9,342 respectively as deductible expenditure under Section 35B of the Income-tax Act of 1961 ('the Act'), for the aforesaid assessment years. The assessee also claimed deduction of premiums paid on an insurance policy taken out by it in the name of one Sri S.K. Sippy employed as its manager under Section 40A(5)(a) of the Act.

4. On an examination of the returns filed by the assessee for the aforesaid years, the Income-tax Officer did not accept the aforesaid claims and disallowed them for various reasons. Against the said assessment orders of the Income-tax Officer, the assessee filed appeals before the Appellate Assistant Commissioner of Income-tax, Bangalore Range-III, Bangalore, who by his orders dated January 22, 1977 and January 25, 1977 allowed them and accepted the aforesaid claims of the assessee. Against the said orders of the Appellate Assistant Commissioner, the Revenue filed appeals before the Income-tax Appellate Tribunal, Bangalore Bench, (Tribunal), which by its common order made on June 30, 1978 dismissed the said appeals. Hence, these references at the instance of the Revenue.

5. In both the references, one of the questions that is common for the two assessment years reads thus :

1. 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing expenditure of a sum of Rs. 8,881 and Rs. 9,342 for the assessment years 1975-76 and 1976-77 respectively incurred by the assessee company as falling under Section 35B(1)(b) ?'

6. Sri K. Srinivasan, learned senior standing counsel for the income-tax Department, appearing for the Revenue, contends that the amounts paid by the assessee to the Export Credit Guarantee Corporation are not paid for the promotion of exports and, therefore, question No. 1 in both the references has to be answered in favour of the Revenue and against the assessee.

7. Sri G. Sarangan, learned counsel appearing for the assessee, contends that on the finding of fact recorded by the Tribunal and the plain language of Section 35B(1)(b) of the Act, the deduction claimed had been rightly allowed by the Tribunal and the Appellate Assistant Commissioner and, therefore, the question has to be answered in favour of the assessee.

8. On the two payments, that are the subject of a common question referred to us, the Tribunal has found thus :

'The department is aggrieved by this order. A copy of the order of the Tribunal has been placed before us. The Bombay Bench of the Tribunal has held that the premium is paid to the Export Credit Guarantee Corporation for getting information regarding the creditworthiness, reputation and fixing the limits of the buyers and it would be covered by Clauses (ii) (vi) and (vii) of Section 35B(1)(b) of the Income-tax Act, 1961, and the expenditure would qualify for weighted deduction. The learned departmental representative has not been able to point out that the reasons for payment of the premium are different from those stated by the Appellate Assistant Commissioner and by the Bombay Bench of the Tribunal. Therefore, following the order of the Bombay Bench of the Tribunal, we hold that the Appellate Assistant Commissioner has rightly allowed weighted deduction under Section 35B in respect of the premium to the Export Credit Guarantee Corporation. The order of the Appellate Assistant Commissioner in this regard is confirmed.'

9. As we read this, the Tribunal and the Appellate Assistant Commissioner have held that the amounts had been paid by the assessee for the promotion of sales of its goods outside India. Sri Srinivasan has not shown as to how this finding is in any way vitiated.

10. What emerges from the above is that the assessee has paid the amounts during the relevant assessment years for obtaining information regarding markets outside India in respect of goods or services or facilities in which it was doing business. Without any doubt, such payments would fall within the purview of Section 35B(1)(b) of the Act and, therefore, the answer to the common question has to be in the affirmative, in favour of the assessee and against the Revenue.

11. We now pass on to examine question No. 2 in ITRC No. 220 of 1979 which reads thus :

'2. Whether, on the facts and in the circumstances of the case, the premium paid by M/s. J. B. Advani and Co., (Mysore) (P) Ltd., on a policy on the life of the manager in the two years under reference were perquisite within the meaning of the term 'perquisite' as used in Section 40A(5)(a) of the Income-tax Act, 1961 ?'

12. Sri Srinivasan contends for answering this question also in favour of the Revenue and in that he sought to distinguish the Division Bench ruling of this court in ITRC No. 169 of 1979 decided on 2nd August, 1984--CIT v. Amco Batteries Ltd. : [1984]150ITR48(KAR) .

13. Sri Sarangan contends that the principles enunciated in Amco Batteries' case squarely govern this question.

14. In Amco Batteries' case, this court had occasion to examine whether premium paid on the personal accident insurance policies of employees can be treated as a perquisite or not for the purpose of Section 40A(5) of the Act. On that question, this court on a detailed examination has held that it was not a perquisite falling within the meaning of that term occurring in Explanation 2(b) (iv) and (v) of Section 40A(5) of the Act, but was a deductible expenditure under the Act. We are unable to see as to how the principles enunciated in this case can be distinguished and held to be inapplicable to cases of payment of premium on an insurance policy of an employee of a company. On the very principles enunciated in Amco Batteries' case : [1984]150ITR48(KAR) and otherwise also, we have no doubt in holding that insurance premia paid are not a perquisite within the meaning of that term occurring in the Act. For all these reasons, we hold that question No. 2 in ITRC No. 220 of 1979 has to be answered in the affirmative, in favour of the assessee and against the Revenue.

15. In the light of the above discussion, we furnish our answers to the questions referred to us as hereunder :

I.T.R. C. No. 219 of 1979 :

Question No. 1: Answered in the affirmative, in favour of the assessee and against the Revenue.

I. T. R. C. No. 220 of 1979 :

Question No. 1: Answered in the affirmative, in favour of the assessee and against the Revenue.

Question No. 2: Answered in the affirmative, in favour of the assessee and against the Revenue.

16. But, in the circumstances of the cases, we direct the parties to bear their own costs.


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