TMI Blog1986 (6) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... of the advertisement and publicity expenditure incurred by it could be disallowed under section 37(3A) in view of the provisions contained in section 37(3D) of the Income-tax Act, 1961 ('the Act'). The IAC rejected the said contention by observing, inter alia, that no separate industrial undertaking had been set up by the assessee for the production of Thums Up as "the same industrial undertaking which was producing and continues to produce the other brand of beverage, namely, Gold Spot and Limca produces this brand Thums Up also with the same plant and machinery". According to the IAC the assessee did not set up any separate plant or machinery for production of its new brand of soft drink 'Thums Up'. The Commissioner (Appeals), however, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish that the assessee by setting up a separate industrial undertaking started manufacture of its new brand of soft drinks during the previous year relevant for the assessment year 1979-80. In this connection, reference was made to the Supreme Court decision in the case of CWT v. Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478 for the proposition that a unit or an undertaking can be said to be 'set up' when it is ready to discharge the function for which it is set up. It has been pointed out that it is only when the unit has been set up. He also referred, in this connection the decision of the Bombay High Court in the case of Century Spg. Mfg. Co. Ltd. v. CWT [1978] 112 ITR 497. In reply, the assessee's learned counsel stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Tribunal in the of First ITO v. Yash Raj Chopra [1984] 10 ITD 709 wherein the case of a film producer it was held that each movie produced amounted to the establishment of an independent industrial undertaking in order to attract the provisions of section 37(3D). 3. Sub-sections (3A) to (3D) of section 37 which contain detailed provisions in regard to the admissibility of advertisement expenses were introduced with effect from 1-4-1979 by the Finance Act, 1978. Sub-section (3D) reads as under : "In a case where an assessee has set up an industrial undertaking for the manufacture or production of any articles, nothing in sub-section (3A) shall apply in respect of any expenditure on advertisement, publicity or sales promotion incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial undertaking set up may not be new but it must be proved that the assessee established a new set up for production of the new article which is distinct and separate from the existing industrial undertaking. The intention of the Legislature in introducing the new sub-sections (3A) to (3D) to section 37 may be found from the Finance Minister's Budget Speech for 1978-79, the relevant portion of which reads as follows : "Extravagant and socially wasteful expenditure is often incurred on advertisement, publicity and sales promotion. In order to put a curb on such expenditure at the cost of the exchequer I propose to provide for the disallowance of a part such expenditure in the computation of taxable profits. Where the aggregate expend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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