THE COMMISSIONER OF INCOME TAX (CNTL.), LUDHIANA versus M/S HERO CYCLES PVT. LTD., LUDHIANA ETC. ETC.

Citation: [1997] SUPP. 3 S.C.R. 612 · Decided: 28-08-1997 · Supreme Court of India · Bench: S.C. SEN · Disposal: Case Partly allowed

Judgment (excerpt)

A 
THE COMMISSIONER OF INCOME TAX (CNTL.), 
LUDHIANA 
v. 
MIS HERO CYCLES PVT. LTD., LUDHIANA ETC. ETC. 
B 
AUGUST 28, 1997 
(SUHAS C. SEN AND S. SAGHIR AHMAD, JJ.] 
Income Tax Act, 1961 : 
C 
S. 35B ( 1 )(b }-Weighted deduction-Held, is pennissible if the assessee 
proves that the entire expenditure is laid out wholly and exclusively for 
purposes mentioned in sub-clause (b) of s.35B(l~nus is on assessee to 
prove his. claim-Tribunal must examine the claim on the basis of facts 
proved by assessee and give a finding as to the entitlement of assessee with 
D reference to relevant sub-clauses of Clause (b) of s. 35B(l)-Tribunal cannot 
allow any weighted deduction without linking the expenditure to one or more 
activities referred to in various sub-clauses of s.35B(l)(b). 
S.35B(l)(b}-Colltribution to Indian Cotton Mills Federation-Held, 
E does not fall within any of sub-clauses of s.35B(l)(b). 
F 
G 
S.35B(l)(b)-Weighted deduction-Circular stated to have been issued 
by Central Board of Direct Taxes-Held, Circulars can bind income Tax 
Officer but will not bind the appellate authority or the Tribunal or the Court 
or even the assessee. 
S.44-l'rofits and gains pf insurance business-Computation of-Asses-
see claims benefit of s.35B-Held, profits and gains of insurance business can 
only be assessed in the manner laid down in the Rules contained in First 
Schedule and not in any other manner. 
S.154-11.ectification of mistakes-Held, can be made only when glaring 
mistake of fact or law committed by officer passing the order becomes 
apparent from the recor~ectificatio11 is not possible if the question is 
debatable-Moreover, the point which was not examined 011 fact or i11 law 
H cannot be dealt as mistake apparent on record. 
612 
Cl.T. (CNTL) LUDHIANAv. HERO CYCLES PVf. LTD. 
613 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7665 of A 
1996 Etc. 
From the Judgment and Order dated 2.6.88 of the Punjab & Haryana 
High Court in l.T.C. No. 16 of 1988. 
T.L.V. Iyer, Ms. Renu George, S. Rajappa, C. Radha Krishna, Ms. B 
Janaki Ramachandran, Ms. Meenakshi Arora, A.T.M. Sampat for the 
appellant in C.A. No. 4671/88, 4043/84, 5755/95, 5620-21/95 and 2230-31/95. 
Uma Datta and B. Kanta Rao for the Respondents. 
The following Order of the Court was delivered : 
Civil Appeal No. 7665/96 
The following question of law was referred by the Tribunal to the 
High Court: 
'Whether on the facts and in the circumstances of the case on a 
proper interpretation of Section 35-B of the Income Tax Act, 1961, 
the Appellate Tribunal was right in law in allowing assessee's claim 
for weighted deduction in respect of "Export Sales Commission" 
"E.C.G.C. Charges" and "Foreign Dealers Visiting Expenses"? 
The High Court declined to call for a reference under Section 256(2) 
c 
D 
E 
of the Income Tax Act, 1961. It appears that the claim for deduction under 
Section 35B was not originally allowed at all. Thereafter, on an assessee's 
application an order was passed by the Commissioner of Income Tax 
(Appeals), Jalandhar, in which he directed certain allowances to be given F 
on proportionate basis after verification of the assessee's claim under 
Section 35B. 
The Income Tax Officer thereafter entertained assessee's prayer for 
rectification of the order and allowed the assessee's claim in respect of 
matters like Coloured Albums, Export staff travelling expenses, Export G 
sales commission, E.C.G.C., foreign dealers visiting expenses. Rectification 
under Section 154 can only be made when glaring mistake of fact or law 
has been committed by the officer passing the order becomes apparent 
from the record. Rectification is not possible if the question is debatable. 
Moreover, the point which was not examined on fact or in law cannot be H 
614 
SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R. 
A dealt as mistake apparent on the record. The dispute raised a mixed 
question of fact and law. 
The Tribunal was in error in upholding the assessee's claim for 
weighted deductions. 
B 
There is no point in sending the matter to the High Court to deal 
with the question raised at this stage. We treat the question as referred to 
this Court and answer the question in the negative and in favour of the 
Revenue. There will be no order as to costs. The appeal is allowed. 
C CA. Nos. 7666-7667/96, SLP(C) Nos. 7485/86, 4588-89/89 
Leave granted in Special Leave Petitions. 
The following questions of law was sought to be raised by the 
Revenue from the order of the 

Excerpt shown. Read the full judgment & AI analysis in Lexace.