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TMI Blog2013 (12) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law as follows:- "Whether the Hon'ble I.T.A.T. was correct in the interpretation of provisions of sub-section (3B) of Section 37 of I.T. Act, 1961 in view of explanation (a) appended to sub-section (3B) of Section 37 of I.T. Act, 1961?" 3. Brief facts giving rise to the Income Tax Appeal are that the assessee filed a return for a loss of Rs.4,87,530/- for the assessment year 1984-85 relevant to previous year ending on 30.6.1983 on 25.6.1984. The assessment was framed under Section 143 (3) on the income computed at Rs.90,70,506/- after giving adjustment of Rs.3051/- in previous year; deduction under Section 35-D as claimed of Rs.45,319/-; deduction under Section 35-B (Export Market Development allowance) as per assessee's claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of law has crept into the appellate order dated 7.8.1989 for assessment year 1984-85 resulting in excessive relief to the assessee. According to the department in the assessment order the assessing officer disallowed Rs.1,19,122/- under Section 37 (3A)/(3B). In appeal it was submitted that the assessing officer should have allowed deduction of Rs.1 lakh in respect of each item viz. advertisement expenses, vehicle upkeep expenses and payments made to hotels. The CIT (A) agreed with the submissions of the assessee and directed re-computation. 7. The D.C.I.T. (Asst.) submitted that the CIT (A)'s directions were not based on the correct interpretation of the provision of Section 37 (3A)/(3B) inasmuch as the deduction of Rs. 1 lakh is admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the clauses was required to be considered independently considering the fact that sub-sec. (3A) refers to the expenditure or, as the case may be, "the aggregate expenditure incurred by an assessee on any one of more of the items specified in sub-sec. (3B)". It may prima facie be correct to say that the expenditure under the three clause of Sec.37 (3B) is to be aggregated but in view of the conjunction 'or', the issue can certainly give rise to a debate. It cannot, therefore, be said that grant of separate deduction of Rs.1,00,000/- in respect of the expenditure separately categorised under three different clauses was a glaring mistake of law. In the circumstances, at best what could be said is that the mistake in the order of the C.I.T. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 1st April, 1986: "(3A) Notwithstanding anything contained in sub-section (1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the items specified in sub-section (3B) exceeds one hundred thousand rupees, twenty per cent of such excess shall not be allowed as deduction in computing the income chargeable under the head 'Profits and gains of business or profession'. (3B) The expenditure referred to in sub-section (3A) is that incurred on- (i) advertisement, publicity and sales promotion; or (ii)running and maintenance of aircraft and motor cards; or (iii) payments made to hotels. Explanation- For the purposes of sub-sections (3A) and (3B),- (a) the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the business of operation of aircraft, in respect of expenditure incurred on running and maintenance of such aircraft; (ii) in the case of an assessee engaged in the business of running motor cars on hire, in respect of expenditure incurred in running and maintenance of such motor cars." 11. A plain reading of Section 37, (3A) to (3C), as amended by Finance Act, 1983 with effect from 1st April, 1984, and deleted by the Finance Act, 1985 with effect from 1st April, 1986, would show that it provides to aggregate the expenditure incurred on the items in sub-section (3B), and thereafter to allow deduction in computing the income chargeable under the head 'profits and gains of business or profession', to the extent of twenty per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )/(3B) by reading the word 'or' after each of the clauses (i), (ii) and (iii) of sub-section (3B). The word 'or' has to be seen in the context of the deduction for expenses on any one or more of the items. Such expenses have to be aggregated for the purposes of allowing deduction. Further we do not agree with the reasons given by the CIT (A) that the provisions for exemption and deduction should be considered liberally. The question of liberal construction of the provisions is permissible when there is any ambiguity or doubt, or where two interpretations are possible for the same provision of law. 14. We also do not find any substance in the objections taken by Shri N.C. Gupta that the AO could not have filed an application under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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