Judgment :- N.V. BALASUBRAMANIAN, J. The following questions of law, for the consideration of this court, have been referred by the Income-tax Appellate Tribunal Tax Cases Nos. 1105 to 1107 of 1985 (assessment years 1974-75 to 1976-77) "In the facts and circumstances of the case, was the Income-tax Appellate Tribunal right in holding that the sum incurred in negotiating export sale documents and realising sale proceeds of exports outside India against delivery of sale document is not eligible for weighted deduction under section 35B of the Income-tax Act, 1961 ?" Tax Case No. 347 of 1986 (assessment years 1977-78) " On the facts and in the circumstances of the case was the Income-tax Appellate Tribunal right in holding that the sum of Rs. 8, 909 incurred in negotiating export sale documents and realising sale proceeds of exports outside India against delivery of sale documents is not eligible for weighted deduction under section 35B of the Income-tax Act, 1961 ?" Tax Case No. 572 of 1986 (assessment year 1978-79) " On the facts and circumstances of the case, was the Income-tax Appellate Tribunal right in holding that the sum of Rs. 37, 710 incurred in negotiating export sale documents and realising sale proceeds of exports outside India against delivery of sale documents is not eligible for weighted deduction under section 35B of the Income-tax Act, 1961 ?" The assessment years involved in the batch of tax cases are 1974-75 to 1976-77, 1977-78 and 1978-79, and the common question that arises in the batch of cases is with reference to the claim of the assessee under section 35B of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), for export markets development allowance on the collection charges paid to the bank on export bills for various assessment years. It is not necessary to set out the figures for each assessment year but the assessee's claim for the various assessment years is that the assessee is entitled to weighted deduction on the expenditure incurred in negotiating export sale documents and realising sale proceeds of exportThe assessee's claim for weighted deduction on the collection charges paid to the banker was rejected by the Income-tax Officer as well as the Appellate Assistant Commissioner. The Appellate Tribunal, on appeal, found that the expenditure incurred in negotiating the sale documents for the goods exported outside India was incurred towards the expenditure charged by the banker for realisation of price of the goods exported or for services rendered by the banker in connection therewith. The Appellate Tribunal also held in the common order that the services rendered by the banker were for the assessee and not for the buyer as it had no direct connection with the supply of the goods, but it was primarily meant for collecting the sale proceeds. The Tribunal held that the payments were made not for services in connection with the execution of the contract with the foreign buyers and, therefore, the assessee was not entitled to claim weighted deduction under section 35B of the Act. Mr. K. C. Rajappa, learned counsel for the assessee, vehemently argued that the question of law as framed is wide enough to consider the question of allowability under sub-clause (viii) of section 35B(1)(b) of the Act. According to learned counsel for the assessee, the assessee acted in association with the banker in negotiating the sale documents and realising the sale proceeds of exports outside India and, therefore, the assessee rendered services outside India and he submitted that the role played by the bank in realising the sale proceeds should be taken into consideration and in the commercial transaction, the bank negotiated documents, tendered documents outside surities (sic) and received money and that would be sufficient to constitute the bank as an associate with the assessee. He strongly placed reliance on the banking practice and submitted that on the basis of the decision of this court in the case of EIlerman and Bucknall Steamship Co. Ltd. v. Sha Bhagajee Sonmull 1961 1961 AIR(Mad) 442, and the decision of the Supreme Court in Mahabir Commercial, Co. Ltd. v. CIT the documents of title relating to the goods have to be sent through the bank which in turn while realising the price through the importer's bank may pass the title to the goods by handing over the documents to the buyer, and even assuming that it was done in India, the activities done by the bank were done in pursuance of the export outside India. He submitted that the delivery of the goods covered by the bill would be completed when the buyer takes delivery on realisation of money. He, therefore, submitted that the services rendered by the bank extended up to the delivery of the goods and, therefore, the bank referred services outside India. He strongly placed reliance on the observation made by the Appellate Tribunal that the expenditure was incurred for'negotiating the sale documents of the goods exported outside India. He submitted that the Tribunal was manifestly in error in holding that the services rendered by the bank were only for the sellers. He submitted that in export, the bank played a crucial role in delivering the documents and the! Tribunal committed an error in curtailing the role played by the bank in negotiating export sale documents. He submitted that the bank was responsible for the transfer of title and since the bank was associated with the assessee for delivery of documents outside India, the expenditure incurred would come within the four corners of section 35B(1)(b)(viii) of the Act and the assessee is entitled to weighted deduction under the said sub-clauseMr. C. V. Rajan, learned counsel for the Revenue, on the other hand, submitted that the onus is on the assessee to prove with the necessary facts that the case of the assessee would fall under any one of the sub-clauses of clause (b) of section 35B(1) of the Act. He invites the attention of this court to the finding of the Appellate Tribunal that the expenditure was incurred only for early realisation of the bills and that finding has not been challenged by it in a separate question. He, therefore, submitted that the assessee is not entitled to weighted deduction. He also submitted that the commercial practice pleaded by learned counsel for the assessee was not placed before the Appellate Tribunal and without factual materials, it is not open to the assessee to claim that the assessee is entitled to weighted deduction. He also submitted that no material was placed by the assessee and without any necessary factual finding and without any finding of the Appellate Tribunal, he submitted, the conditions prescribed in sub-clause (viii) of section 35B(1)(b) of the Act are not satisfied. He also submitted that no material was placed by the assessee and without any necessary factual finding and without any finding of the Appellate Tribunal, he submitted, the conditions prescribed in sub-clause (viii) of section 35B(1)(b) of the Act are not satisfied. He also submitted that there are no materials to show that the bank has rendered certain services outside India and in the absence of any material to prove what were the services rendered by the bank outside India, the finding of the Appellate Tribunal that the bank has rendered services, only for the assessee and not for the buyer and it had no direct connection with the supply of goods should be accepted. He, therefore, submitted that the bank has merely played a role of collecting the sale proceeds and, therefore, the assessee is not entitled to weighted deduction. Learned counsel for the assessee, in his reply, submitted that the commercial practice is applicable to all export transactions and both the bank and the assessee played a role within the meaning of sub-clause (viii) of clause (b) of section 35B(1) of the Act. He submitted that once it is a commercial practice, it is unnecessary for the assessee to prove the activities done by the bank. He submitted that it is not a case of discounting a bill, but the bank has played a crucial role in collecting sale proceeds at the time of delivery of documents outside India and, therefore, on the basis of banking practice the assessee is entitled to claim the weighted deduction and it is a facet of the question raised by the assessee and, therefore, the assessee is entitled to claim weighted deduction under section 35B(1)(b)(viii) of the ActWe have carefully considered the submissions of learned counsel for the parties. Let us consider the case law cited by learned counsel to appreciate the points that arise in the tax cases. In Ellerman and Bucknall Steamship Co. Ltd. v. Sha Bhagajee Sonmull 1961 1961 AIR(Mad) 442, a Bench of this court considered the duties of the seller and buyer and the liability of the banker on the issue of letter of credit. In Ellerman and Bucknall Steamship Co. Ltd. v. Sha Bhagajee Sonmull 1961 1961 AIR(Mad) 442, a Bench of this court considered the duties of the seller and buyer and the liability of the banker on the issue of letter of credit. Ramachandra Iyer J. (as his Lordship then was) speaking for the Bench considered the system of payment of buyer to seller by means of letter of credit and after considering Cheshire and Fifoot's Law of Contracts (1956 edition) and after evaluating the main features of the letter of credit held that a letter of credit involves a mandate by the constituent (buyer) and an undertaking by a banker to meet drafts drawn under the credit by the beneficiary of the credit (example, the seller) in accordance with the conditions laid down therein, and the credit is designed to facilitate trade with foreign countries. The Bench also found that there may be cases where the bank, with whom a constituent opens a letter of credit, has no office at the place where the credit is to be operated on, that is, where payments are to be made under the contract. The Bench, after noticing the above features, held as under (page 446). "In such cases, the credit opening bank, in its turn, employs another bank which carries on business, or has a branch transacting business at that place as its agent for negotiating shipping documents and paying the beneficiary of the credit. The latter bank, known as the paying or intermediary bank, has ordinarily no privity of contract with the constituent who opens the letter of credit, i.e., the buyer. In certain cases, the original bank itself opens a letter of credit with the paying bank." The Supreme Court in the case of Mahabir Commercial Co. Ltd. v. CIT, considered the matter in detail regarding the issue of letters of credit. The Supreme Court quoted with the approval of the judgment of Lord Justice Scrutton in Guaranty Trust Company of New York v. Hannay and Co. 1918 (2) KB 623 (CA) and dealt with the question how letters of credit are operated in the following words (page 425). "The buyer requests his bank and arranges with it the issuance of credit for payment at the place of the seller's domicile specifying the documents against which it has to make payment. 1918 (2) KB 623 (CA) and dealt with the question how letters of credit are operated in the following words (page 425). "The buyer requests his bank and arranges with it the issuance of credit for payment at the place of the seller's domicile specifying the documents against which it has to make payment. The buyer agrees also to indemnify the bankers in respect of such advances and of any claim arising out of the credit. The letter constitutes the memorandum of the, buyer's instructions to the banker. On receipt of this application the banker issues the credit which is addressed to and sent to the seller or it may take the form of a request to an intermediary banker who is asked either merely to advise the seller or advise and to add his confirmation. The credit may be issued by cable which is later followed by writing. These letters may be given for the purpose of being shown to third parties who may act thereon. Letters of credit are either revocable or irrevocable and where it is the latter, it may be confirmed or unconfirmed. If confirmed it means that words of confirmation of another banker are added to it by which that banker also commits himself irrevocably. The letter of credit notifies the seller that the issuing banker or his correspondent will (if they are drawn on him) accept or honour drafts drawn for the price of the goods, provided that the documents of title and other documents specified in the credit are simultaneously presented to the banker. On receipt of the credit the seller ships the goods and insures them, obtaining a bill of lading normally made out to his order, but perhaps to that of the banker, and also a policy of marine insurance. He then draws for the price of the goods and with the documents, i.e., the bill of lading, policy and invoice specified in the credit presents the draft for acceptance, payment and negotiation. In this way the exporter gains the advantage of receiving payment for his goods without delay. He then draws for the price of the goods and with the documents, i.e., the bill of lading, policy and invoice specified in the credit presents the draft for acceptance, payment and negotiation. In this way the exporter gains the advantage of receiving payment for his goods without delay. The documents are then sent by the banker to the buyer's bank and on the bill of exchange being accepted by him by payment of the price the bill of lading and the invoice is delivered to him : see Halsbury, volume 2, page 213, and Gutteridge and Megrah on The Law of Commercial Credits (1968 edition)." In Halsbury's Laws of England (fourth edition, volume 3) after considering the nature of commercial letters of credit, types of credit and the exact relationship between the banker and the buyer, the learned author made the following observation regarding the relationship between the seller and the banker: "The contractual relationship between the issuing banker and the buyer is defined by the terms of the agreement between them under which the letter opening the credit is issued; and as between the seller and the banker, the issue of the credit duly notified to the seller creates a new contractual nexus and renders the banker directly liable to the seller to pay the purchase price or to accept the bill of exchange upon tender of the documents." The above passage of Halsbury clearly establishes that the issuing bank can stipulate that it can retain the document of title until the bank is assured of repayment by the buyer. The exact relationship between the issuing banker and the paying banker is also dealt with by the same author in paragraph 138 as under: "The contract between the issuing or opening banker and the paying or negotiating (intermediary) banker partakes of a dual nature. The relationship is partly that of principal and principal, partly of principal and agent, mandator and mandatory. It depends, too, in some measure, on the nature of the credit, whether it be revocable or irrevocable. In order that he may claim to be reimbursed for any payment he makes under the credit, the banker paying must obey strictly the instructions he receives, for by acting on them he accepts them and thus enters into contractual relations with the opening or issuing banker. In order that he may claim to be reimbursed for any payment he makes under the credit, the banker paying must obey strictly the instructions he receives, for by acting on them he accepts them and thus enters into contractual relations with the opening or issuing banker. Most of the difficulties which arise in practice are due to the fact that often instructions are not clear, or are intended to mean something different from what they actually convey. The instructions may take the form of an authority to (1) pay against documents or against drafts accompanied by documents, and (2) negotiate drafts drawn either on the opening banker or on the buyer; the instructions may or may not be accompanied by instructions to confirm the credit, that is, for the intermediary banker to place himself in binding contractual relationship with the beneficiaryIt is, further, a duty of the opening or issuing banker to take up or reject promptly documents tendered to him in pursuance of the authority contained in the credit." In Paget's Law of Banking (ninth edition) the learned author dealt with the effect of issue of letters of credit. The learned author described the legal relationship between the intermediary banker and the beneficiary as under: "The promise of the banker issuing the credit to the seller-beneficiary is supported by good consideration. If there is delay in making payment the issuing banker may be liable for any loss suffered by the beneficiary thereby. Where there is a direct relationship between the two it is that of principal and principal; but usually there is an intermediary bank who may himself be a principal in his own right vis-a-vis the beneficiary, as where he confirms the credit. Where confirmation is given on the credit of the issuing banker the beneficiary, having the undertaking of both issuing and intermediary bankers, may sue either or both. If, instead, the intermediary banker issues his own credit, there is probably no private between the issuing banker and the beneficiary, and the intermediary banker alone is responsible to the beneficiary, for the original credit may be said to be merged in that of the intermediary banker, whose responsibility for payment the beneficiary accepts in lieu. He may well have demanded confirmation in his contract with the buyer. He may well have demanded confirmation in his contract with the buyer. The contract between the intermediary banker and the beneficiary depends upon the terms in which the former's promise to pay is couched; it becomes binding, in the case of a confirmed credit, that is, an irrevocable credit which has been confirmed by the intermediary banker, as soon as it is communicated to the beneficiary. If the credit is revocable, there is no point in having it confirmed; such a credit is deemed to be revocable at any time without notice, though a banker acting on a revocable credit could claim to be reimbursed in respect of any payment he had properly made up to the time notice of revocation reached him. But as regards the beneficiary a revocable credit may be withdrawn at any time without notice and a paying banker is not bound to advise the beneficiary of its cancellation, though he may do so as a matter of courtesy. Where the (revocable) credit takes the form of an authority to purchase drafts, any bank acting on the strength of the authority must be deemed to know its terms. Where a credit, not expressed to be revocable or otherwise, or restricted for negotiation to a named bank, stated that it would remain in force for a given period, it could not be revoked to the prejudice of negotiations of bills drawn under it and negotiated within the period of validity on the strength of it." A study of the above decisions as well as commentaries clearly establishes that there must be a tender of documents for payment by the bank which issued the letters of credit and unless the documents are tendered to the specification ordered for which the letters of credit were issued, the question of payment for the goods exported does not arise. Therefore, it is the duty of the seller to tender the documents to claim the payment and the documents can be tendered either by the beneficiary directly to the bank which issued the letters of credit or to an intermediary bank which acts on behalf of the buyer, but in any event, when the seller's bank acts on behalf of the seller in the matter of performance of tender of documents, it is not acting on behalf of the buyer. The position is clear from the role of the seller's bank in the performance of certain services in collecting the sale proceeds by tendering the documents of sale to collect the payment, but that itself would not be sufficient or enough to hold that the seller's bank had performed services outside India. The assessee can succeed in its claim for deduction under section 35B of the Act only if the assessee establishes that the expenditure was incurred for the performance of service outside India. We have seen the mode of operation of letters of credit and it is perfectly open to the seller's bank to tender documents to the intermediary bank or the buyer's bank in India and demand payment for the seller and when it tenders documents to the issuing bank, it is not necessary that the tendering of documents should also always take place outside India. The assessee has also not established that the expenditure incurred in negotiating the sale documents for the goods exported outside India was incurred for the performance of the services outside India. The assessee has also not established whether such performance by the bank was in connection with or incidental to any contract for supply of goods outside India. The wide range of activities undertaken by the bank, the different types of commercial credits and the role the bank plays at the time of tender of the documents make it clear that unless the assessee establishes that the bank has rendered certain services outside India in connection with the delivery of the goods or tender of documents, the assessee's claim cannot be accepted. We are, therefore, of the opinion that from the statement of the Appellate Tribunal that the expenditure was incurred "for negotiating the sale documents for goods exported outside India," it is not possible to make out a case that the assessee's bank had rendered services outside India. We are, therefore, of the opinion that from the statement of the Appellate Tribunal that the expenditure was incurred "for negotiating the sale documents for goods exported outside India," it is not possible to make out a case that the assessee's bank had rendered services outside India. On the other hand, the Tribunal has recorded a clear finding that there was no direct connection between the seller's bank and the buyer and the bank of the seller had acted merely as agent to collect the sale proceedsIt is well established by the decisions of the Supreme Court in the case of CIT v. Stepwell Industries Ltd. and in the case of CIT v. Hero Cycles Pvt. Ltd. that the expenditure can be 1allowed under section 35B of the Act only if the expenditure was wholly and exclusively incurred for any one of the purposes mentioned in any one of the sub-clauses of section 35B(1)(b) of the Act and unless the assessee establishes by materials, and proves that the expenditure was incurred during the previous year wholly and exclusively for the purpose set out in clause (b) of section 35B(1) of the Act, the assessee is not entitled to claim weighted deduction. The apex court has categorically laid down that the onus is on the assessee to prove that the expenditure should fall within any of the sub-clauses of section 35B(1)(b) of the Act. In Walker Anjaria and Sons Pvt. Ltd. v. CIT the assessee incurred an expenditure by way of payment of service charges to the bank in providing facility to make payment on arrival of the ship, and the Gujarat High Court held that the assessee had not proved that any service was rendered by the assessee to the foreign buyer outside India and the mere fact that under the terms of the contract, the assessee permitted the foreign buyer to make payment of the goods supplied on the arrival of the steamer would not show that the assessee had rendered certain services outside India. The Bombay High Court in CIT v. Jaipur Metals and Electricals Ltd. and the Calcutta High Court in (i) Brooke Bond India Ltd. v. CIT, (ii) Hindusthan Gas and Industries Ltd. v. CIT 1995 (79) Taxman 151, and (iii) Bhansali and Co. v. CIT 1995 (78) Taxman 501, have also taken the same view. The Bombay High Court in CIT v. Jaipur Metals and Electricals Ltd. and the Calcutta High Court in (i) Brooke Bond India Ltd. v. CIT, (ii) Hindusthan Gas and Industries Ltd. v. CIT 1995 (79) Taxman 151, and (iii) Bhansali and Co. v. CIT 1995 (78) Taxman 501, have also taken the same view. We are in respectful agreement with the views expressed by the Gujarat, Bombay and Calcutta High Courts and hold that unless the assessee establishes that it had itself or in association with some third party, performed certain services outside India for the supply of goods exported, the assessee is not entitled to claim weighted deduction in respect of the expenditure incurred for such servicesIt is, no doubt, true that the banks play an important role in the matter of export of goods to foreign countries and for the performance rendered by the bank, the assessee has necessarily to pay charges to the bank. But, the mere fact of payment to the bank would not enable the assessee to claim the weighted deduction. The assessee can succeed in its claim only if the assessee establishes that the expenditure was incurred in connection with the export sale and the expenditure incurred falls within any one of the sub-clauses of section 35B(1)(b) of the Act. In so far as the expenditure under section 35B(1)(b)(viii) is concerned, the expenditure must be incurred on "performance of services outside India in connection with, or incidental to, the execution of any contract for the supply of goods outside India," and a mere reading of that sub-clause clearly indicates that there must be performance of services outside India and it must be in connection with, or incidental to, the execution of any contract for the supply out, ide India of such goods, services and facilities. Therefore, the mere fact that the bank had performed certain services in negotiating the sale documents would not be sufficient to enable the assessee to claim weighted deduction and the duty of the assessee is to further prove that the bank had performed certain services outside India in connection with the execution of any contract for supply outside India of exported goods. We are of the opinion that the case of the assessee falls short of the statutory requirements prescribed under various sub-clauses of section 35B(1)(b) of the Act and we, therefore, hold that the Tribunal was correct in holding that the assessee is not entitled to weighted deduction on the expenditure incurred in connection with negotiation of export sale documents and realisation of sale proceeds of exportsThe question of law framed proceeds on the basis that the assessee has realised the sale proceeds of exports outside India against the delivery of sale documents. But there is no finding by any of the authorities or by the Appellate Tribunal, that also the assessee's bank realised sale proceeds of exports outside India against delivery of sale documents. Therefore, the question, as framed, does not reflect the actual controversy that was in issue before the Appellate Tribunal. Accordingly, we reframed the question in all cases as under: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sum incurred in negotiating sale documents for the goods exported outside India is not eligible for weighted deduction under section 35B of the Income-tax Act, 1961 ?" This will be the common question of law for all the assessment years. We answer the question of law as reframed by us in the affirmative and against the assessee. The Revenue will be entitled to costs of Rs. 2, 500 one set.