TMI Blog1994 (11) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the expenditure incurred in connection with the inauguration of its new unit ? (ii) the above expenditure is 'advertisement' expenditure ? (iii) the assessee is entitled to claim deduction of the expenditure under section 37(1) also in view of the fact that the expenditure is before or at the time of the commissioning of the new unit ? " The assessee which is a public limited company engaged in the manufacture of aluminium conductors, steel wires, machines, circuit breaker, etc., claimed deduction of an amount of Rs. 2,38,689 as business expenditure under the head of " advertisement " for the assessment year 1982-83. The above amount was expended by the assessee in connection with the inauguration ceremony, when its " relay " p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount of Rs. 2,38,689 as expenditure for the inaugural function in addition to an amount of Rs. 11,52,409 claimed for different items under the head of " advertisement " expenses. We find no merit in the contention raised on behalf of the Revenue that the amount spent by the assessee in connection with the inaugural function of its new project is in the nature of capital expenditure as it was incurred not after the commissioning of the new unit. The assessee was already having manufacturing units and the " relay " project which is inaugurated in January, 1982, was one in expansion of its existing business. We are, therefore, of the view that merely because the expenditure was incurred not after the commissioning of the new unit it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw Lord stated as follows : " A sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency, and in order indirectly to facilitate the carrying on of the business, may yet be expended wholly and exclusively for the purposes of the trade. " In CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140, the Supreme Court held that the expression " for the purpose of business " has a meaning of a wider range and it will take in different types of expenditure incurred for the carrying on of the business subject to the condition that the assessee shall incur it in his capacity as a person carrying on the business. In Bombay Steam Navigation Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vertisement which was involved in the publication of a brochure on the occasion of the golden jubilee of the company. Expenditure incurred for organising football and hockey tournaments was held to be an allowable claim for its advertising value for the company in CIT v. Delhi Cloth and General Mills Co. Ltd. [1978] 115 ITR 659 (Delhi). The fact that the assessee had incurred an expenditure of Rs. 2,38,689 in connection with the visit of the Chief Minister of Kerala to its factory, the press conference held and other items of expenditure for publicity and advertisement on the commissioning of its " relay " project in January, 1982, is not in dispute. But, according to the assessing authority, since the assessee had already claimed an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of advertising in this respect is dealt with in the book " Advertising Management Concepts and Cases " by Manendra Mohan at page 520 as follows : " Advertising can play a major role in supporting the sales of a company manufacturing industrial products. Equally important is the image of the company, which can be created and maintained by industrial advertisements. When a company starts a business or introduces a new product, it may have some significant points of difference from other companies or products. In order to gain recognition, the company has to manage the flow of information about itself and its products. Corporate image comprises the knowledge, feelings, ideas and beliefs associated wit a company's activities. People form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness expenditure. It was held that the amount spent by the assessee on account of printing invitation cards, construction of shamiana, hiring furniture and transport in connection with the function can be claimed as business expenditure. Taking a similar view, the Calcutta High Court observed in CIT v. Hindusthan Aluminium Corporation Ltd. [1989] 176 ITR 206, as follows : ".... The modern trend is to get a factory or a branch inaugurated by the Prime Minister or a Minister or V. I. P., as the case may be. It is the real nature and quality of the payment which would prove decisive. Any payment made in the course of and for the purpose of carrying on business or trading activity would be revenue expenditure. The expenditure in connection wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
