K. Shivashankar Bhat, J.

1. In these two references under section 256(1) of the Income Tax Act, 1961 (for short "the Act"), the common question referred for out consideration reads thus :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that weighted deduction under section 35B was not available in respect of the expenditure incurred for samples sent abroad "

2. These references are in respect of the assessment years 1882-83 and 1981-82, respectively. The statement of the case referred to us states that the assessee is a firm carrying on the business of sale of ready-made garments. To promote export trade, the assessee had sent samples abroad. The samples had been sent for the sake of advertisement, which involved certain expenditure.

3. The question, therefore, is whether this expenditure deserves to be treated under Section 35B of the Act.

4. Two sub-clauses of section 35B(1)(b) of the Act are necessary to appreciate the question. As per sub-clauses (i) and (vi), certain expenditure incurred wholly and exclusively on the matters referred to therein, are entitled to weighted deduction. Sub-clause (vi) was deleted with effect from April 1, 1981, by the Finance (No. 2) Act, 1980. According to the Revenue, the samples were specifically covered by sub-clause (vi) and, therefore, expenditure incurred in respect of the "samples" are outside the purview of sub-clause (i). The assessee contends that in the case of sending samples abroad, such sending would result in advertisement or publicity outside India and, therefore, sub-clause (i) would cover the case.

5. The fact that the samples were sent abroad, to promote export trade and for the sake of advertisement, is not disputed because that is the very basis of the reference stated in the statement of the case. The Appellate Tribunal also, in its order at paragraph 3, states that the samples would appear to have been sent for the sake of advertisement. Therefore, if the sending of the samples is for the purpose of advertisement, can it be said that the said advertisement was not covered by sub-clause (i) at all. The subjects covered by the provisions of section 35B are quite wide. Under several sub-clause, provisions are made for giving weighted deduction obviously to encourage exports from India. In the case of a business transaction, an item of transaction cannot be always identified by a particular nomenclature. It is quite possible that a particular transaction may admit of more than one description. For example, a manufacturer in India may invite representative of the traders from abroad and in that regard, expenditure may have to be incurred. These foreign invites not only would convey information regarding markets in their country, but also would gain their own impressions about the articles manufactured by the particular manufacturer, which, in turn, would cause publicity for the said articles outside India. This is a situation which will be covered both by sub-clause (i) and sub-clause (ii) of section 35B(1)(b). Similarly, under sub-clause (v), activities incidental to the main activity of preparation and submission of tenders, etc., necessarily the requisite information shall have to be obtained. This is a situation which can be brought within sub-clause (ii) and sub-clause (v)

6. Having regard to the object of section 35B, it is necessary to give a liberal interpretation so that the purpose behind it could be properly effectuated. If the purpose of an advertisement could be achieved by sending samples abroad, there is absolutely no reason as to why such an act of sending samples should be confined to sub-clause (vi) alone.

7. The Boards Circular No. 27, dated August 16, 1969, was brought to our notice. While discussing the provisions of sections 35B and 35C, the Board observes, inter alia, that to avail of the benefit of these provisions, it is necessary that "the expenditure falls" under "one or more" of the several qualifying there under. This sentence clearly brings out the scheme of section 35B(1)(b) of the Act. That the expenditure may fall under one or more of the sub-clause is a fact recognised even by the Board.

8. Mr. Raghavendra Rao tried to justify the Revenues stand by referring to the amended Explanation 2 to section 35B. It reads :

"For the removal of doubts, it is hereby declared that nothing in clause (b) shall be construed to include any expenditure which is in the nature of purchasing and manufacturing expenses ordinarily debatable to the trading or manufacturing account and not to the profit and loss account."

9. It was contended that the expenditure incurred in connection with the samples would be covered by this Explanation. It is not possible for us to agree with this contention because the expenditure incurred in connection with the samples sent for advertisement, cannot be considered to be in the nature of purchasing and manufacturing expenses. In these circumstances, we disagree with the view expressed by the Appellate Tribunal.

10. In the result, the question referred to us is answered in the negative and against the Revenue.