Judgment :- R. JAYASIMHA BABU, J. The first question referred to us, for the asst. yr. 1980-81, at the instance of the Revenue is as to whether the Tribunal was right in holding that the assessee is an exporter and entitled to weighted deduction under s. 35B, despite the fact that under an agreement with one Nataraj Enterprises, it had assigned for a period of ten years, the right to exploit the film "Dil Aur Deewar" for the overseas territories, reserving the right to receive payment of Rs. 10.50 lakhs, and in respect of excess collections, after debiting expenses, 50 per cent of the balance. The agreement, further, also provides that the publicity material required for the exhibition of the film overseas is to be supplied by the assessee, who is also entitled to receive back the materials at the end of the ten year period. The assessee claimed the benefit of s. 35B for the publicity materials sent by it, as also for the cost of the positive prints, 26 in number, which had been delivered by it to Nataraj Enterprises. It must be mentioned here that the Tribunal has found that the export licence was obtained by the assessee and that under the terms of the agreement the proceeds of the export and foreign exchange are to be made over to the assessee. On these facts, the Tribunal has found that the publicity materials which were sent out of India were the materials that had been supplied by the assessee, that it is eligible for being regarded as part of the advertisement or publicity outside India of the film "Dil Aur Deewar" and that the expenses incurred on such publicity material qualify for deduction under s. 35B(1)(b)(i) of the IT Act. We do not find any infirmity in that view of the Tribunal. The assessee is admittedly the producer of the film, in respect of which it had contracted with Nataraj Enterprises for the distribution, exhibition and exploitation of the film in the overseas territories and the payment to be made to that firm was only 50 per cent of the excess collection in excess of the sum of Rs. 10.50 lakhs which sum was to be paid to the assessee. The export was made only in the name of the assessee which had obtained the export licence. 10.50 lakhs which sum was to be paid to the assessee. The export was made only in the name of the assessee which had obtained the export licence. The publicity material had been supplied by the assessee and was in fact taken to centres outside India and used for the exhibition of the film.Sec. 35B(1) refers to the expenditure incurred by the person, which is not in the nature of capital expenditure or personal expenses of the assessee, referred to in cl. (b). Clause (b)(i) refers to expenditure on advertisement or publicity outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business. The publicity materials provided by the assessee here were in respect of the film which had been produced by the assessee and which was being exploited in the overseas market through the help of the assignee. Though the agreement is termed as one of assignment, it in substance provides for payment to the assignees so called, of only 50 per cent of the surplus collections over and above the sum of Rs. 10.50 lakhs and also requires the assignees to make over to the assessee all the export benefits. In this situation, it must be held that the cost of the advertising material was an item of expenditure incurred by the assessee in respect of the services and facilities which it provides in the course of its business. The assessee's claim for deducting the cost of the positive prints has been disallowed by the Tribunal. That disallowance has also been called into the question before us by the assessee. It is contended for the assessee that r. 9A of the IT Rules, as it stood during the relevant assessment year, namely, 1980-81, and which deals with deduction of expenditure on production of feature films excludes the cost of preparation of the positive prints of the film, from the scope of "cost of production". The submission of counsel was that such exclusion would indicate that while the cost of production is a capital expenditure, cost of preparation of the positive prints is a revenue expenditure. The submission of counsel was that such exclusion would indicate that while the cost of production is a capital expenditure, cost of preparation of the positive prints is a revenue expenditure. This line of argument was adopted, in view of the finding recorded by the Tribunal that positive prints are capital goods and expenditure incurred thereon is capital expenditure and would therefore not qualify under s. 35B.Sec. 35B(1)(b)(iii) refers to expenditure on distribution, supply or provision outside India of such goods, services or facilities, not being expenditure incurred in India in connection therewith, or expenditure (wherever incurred) on the carriage of such goods to their destination outside India or on the insurance of such goods while in transit. The goods referred to therein are the goods with which the assessee deals or provides in the course of his business. The expenditure that is allowable is not the cost of making of the goods, but the expenditure incurred on the distribution, supply or provision outside India of the goods. In the context of the exploitation of the film outside India, the goods necessary for such exploitation would be the positive prints which have to be made from the negatives and which positive prints are required to be taken out of India for the purpose of exhibition in theatres outside India. While the expenditure incurred on the distribution of those positive prints outside India may qualify, the cost of the goods themselves cannot qualify for deduction under those provisions. That would be so whether the goods are positive prints or any other goods taken outside India and distributed, supplied or provided outside India. The purpose of s. 35B is to enable the assessee under the Act to develop export markets and what is allowed under that provision is an allowance for development of markets abroad. It is not intended to cover the cost of the goods which are taken out of India and either sold or exploited. In the case of a film, as technology stood during the relevant assessment year, the only way to exploit the film was by first making positive prints out of the negative, whether such prints are made in India or elsewhere, and thereafter carrying those positive prints to the centres where it is to be exhibited. In the case of a film, as technology stood during the relevant assessment year, the only way to exploit the film was by first making positive prints out of the negative, whether such prints are made in India or elsewhere, and thereafter carrying those positive prints to the centres where it is to be exhibited. For the purpose of s. 35B(1)(b)(iii), such positive prints would constitute goods when prints are taken in India and such prints are carried to markets outside India for being distributed to exhibitors abroad. The cost of the positive prints, therefore, would fall outside the purview of s. 35B(1)(b)(iii) of the IT Act.The fact that r. 9A does not recognise the cost of making positive prints as constituting part of the cost of production, does not have any bearing in understanding the scope of s. 35B. Rule 9A is a special provision providing for deduction in respect of expenditure incurred on the production of feature films. That rule treats production as having come to an end when the negative film is ready, from out of which positive prints can be taken. Sec. 35B is not concerned with the cost of production of films or of any other cost. It is only concerned with the expenditure incurred on the development of markets abroad; and provides for allowance for such expenditure as is capable of being brought within the scope of that provision. Mere incurring of expenditure abroad is insufficient. It must be expenditure of a kind which falls within any one of the sub-clauses of s. 35B(1)(b). The Tribunal has misled itself by launching an enquiry as to whether the positive prints are capital goods or whether the expenditure incurred on the making of such positive prints is revenue expenditure. Such enquiry was not called for having regard to the language employed in s. 35B(1)(b) and the purpose for which s. 35B was placed on the statute book. We, therefore, hold that the Tribunal was right in its conclusion that the assessee was not entitled to claim allowance under s. 35B in respect of the cost of positive prints, though the reasons given by the Tribunal do not merit our approval. The other question referred to us at the instance of the assessee is as to whether the Tribunal was right in holding that the sum of Rs. The other question referred to us at the instance of the assessee is as to whether the Tribunal was right in holding that the sum of Rs. 60, 000 representing the value of four prints was to be assessed as income after holding that they cannot form part of the closing stock. The assessee, admittedly, follows the mercantile system. At the end of the previous year relevant to the assessment year in question, the four prints valued at Rs. 60, 000 were not part of the closing stock. Those prints were in transit to Nataraj Enterprises being part of the larger number which the assessee had undertaken to provide to them in terms of the agreement and for which Nataraj Enterprises was required to effect payment. Having regard to the fact that the assessee was following the mercantile system, the fact that it had not received the value before the end of the relevant previous year, is not of any materiality, as the income had accrued to it. The Tribunal was, therefore, right in holding that the sum of Rs. 60, 000 representing the value of the four prints was required to be treated as part of the income of the assessee for the asst. yr. 1980-81.In the result, we answer the questions referred to us at the instance of the Revenue, in favour of the assessee. The questions referred to us at the instance of the assessee are answered against the assessee, except that the Tribunal was wrong in holding that the expenditure incurred on preparation of the positive prints was capital expenditure, denial of the benefits of s. 35B in respect of such expenditure, however, being correct in law. The parties are directed to bear their respective costs.