R. C. Lahoti, J. ( 1 ) UNDER Section 256 (1) of the Income-tax Act 1961, the following question of law referable to assessment year 1977-78 has been referred at the instance of the Revenue for the opinion of the High Court:- "whether on the facts and circumstances of the case, the assessee is entitled to weighted deduction under Section 35-B of the Income-tax Act, 1961 in respect of the sum of Rs. 5,43,628. 00 representing expenditure on refining, melting and handling charges ?" ( 2 ). From the statement of the case drawn up by the Tribunal, it appears that the assessee was engaged in the export of silver. The export was made through the State Trading Corporation pursuant to the agreement entered into between the assessee and the Corporation. The silver exported by the assessee was to be of a particular percentage of purity. After the silver was exported, the importer before accepting the refined silver sent by the assessee had as per the terms of the sale agreement got the silver melted and refined so as to verify its purity. A sum of Rs. 5,43,638. 00 was spent on the said melting, refining and handling charges. Before the I. T. O. the assessee laid a claim for weighted deduction. Under sub-clause (viii) of Clause B of sub-section (1) of Section 35 (B) of the Income-tax Act 1961 (the provision as stood at the relevant time ). ( 3 ). The claim was allowed by the assessing Officer forming an opinion that the same was incurred wholly and exclusively in respect of export business carried by the assessee. ( 4 ). The Commissioner of Income-tax on examining the assessment records formed an opinion that the order of the I. T. O. permitting the above said claim was prejudicial to the interest of the Revenue. The C. I. T. formed an opinion that the said expenditure related to obtaining the stock-in -trade which the assessee exported, thus the expenditure was incidental to or relating to the supply of the goods. The C. I. T. , therefore, directed the I. T. O. to disallow the expenditure. ( 5 ). The assessee preferred an appeal against the order of the C. I. T. The Tribunal arrived at the following finding: "we have considered the rival submissions and perused through the papers filed. Refining, handling and melting expenses of Rs. 5,43,628. The C. I. T. , therefore, directed the I. T. O. to disallow the expenditure. ( 5 ). The assessee preferred an appeal against the order of the C. I. T. The Tribunal arrived at the following finding: "we have considered the rival submissions and perused through the papers filed. Refining, handling and melting expenses of Rs. 5,43,628. 00 cannot be called the expenses for procuring stock-in-trade. The assessee had already sent purified silver i. e. stock-in-trade to the foreign buyers. To verify its purity the buyers got the said silver melted and got it refined. Only after satisfying about its purity they paid the sale proceeds to the assessee deducting from the sale proceeds the said expenses on refining, handling and melting. The I. T. O. is right in his allowing the assessee deduction under Section 35-B on these expenses. "accordingly the Tribunal set aside the order of the C. I. T. and restored the order of the I. T. O. ( 6 ). The aggrieved Revenue filed a petition under Section 256 (1) of the Income-tax Act, whereupon this reference has followed. ( 7 ). Under Section 35b ( as it stood at the relevant time), where an assessee had incurred, whether directly or in association with any person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) wholly and exclusively on "performance of services outside India in connection with or incidental to, the execution of any contract for the supply outside India of such goods, services or facilities", it was entitled to weighted deduction at a certain ratio. ( 8 ). The phraseology used by the Legislature in drafting sub-clause (viii) extracted and reproduced in the preceding para is very vide. The expenditure may be incurred in India or outside India, but the performance of services must have been outside India. It may be in connection with or even incidental to the execution of any contract for the supply outside India of such goods etc. In the case at hand, it is clear from the statement of the facts of the case that fulfilment of the contract for the supply of the silver depended on the satisfaction of the importer as to the purity of the silver. Expenditure was incurred on services, which satisfied the importer of such purity. The expenditure was reimbursed by the exporter. Expenditure was incurred on services, which satisfied the importer of such purity. The expenditure was reimbursed by the exporter. Thus the expenditure incurred by the importer was for and on behalf of the exporter. If the importer would not have incurred the expenditure subject to reimbursement from the exporter then the exporter would have been required to incur the same expenditure on securing the performance of service outside India. The expenditure was, therefore, clearly covered by the sub-clause (viii) abovesaid. ( 9 ). In our opinion the Tribunal did not err in forming the opinion which it did. The question is, therefore, answered in the affirmative i. e. in favour of the assessee and against the Revenue.