TMI Blog2002 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... - Judge(s) : N. V. BALASUBRAMANIAN., K. RAVIRAJA PANDIAN. JUDGMENT The judgment of the court was delivered by N. V. BALASUBRAMANIAN J.- The Income-tax Appellate Tribunal, in pursuance of the order of this court in T. C. P. No. 348 of 1996 dated April 1, 1997, has stated a case and referred the following questions of law: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee-company is entitled to investment allowance under section 32A of the Act on machinery leased out in the course of its business of leasing? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the expenditure incurred on advertisement inviting fixed deposits from public does not form part of the sales promotion expenses calling for disallowance under section 37(3A) of the Act ?" The assessment year with which we are concerned is 1984-85 and as far as the first question of law referred to us is concerned, it is fairly submitted by learned counsel for the Revenue that the issue raised in the first question is covered against the Revenue by a decision of the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of section 37(3A) of the Income-tax Act. Learned counsel therefore submitted that since the expenditure incurred was advertisement expenditure and sales promotion expenditure, the entire expenditure is not allowable, but it is allowable subject to the restrictions contained in section 37(3A) of the Income-tax Act. Learned counsel also relied upon the decision of the Supreme Court in the case of Hindustan Aeronautics Ltd. v. CIT [2000] 243 ITR 808 and submitted that the Supreme Court has held that the circulars or instructions of the Central Board of Direct Taxes cannot override the view of the High Court or the Supreme Court. Learned counsel therefore submitted that the circular issued by the Central Board of Direct Taxes which has been relied upon by the learned counsel for the assessee cannot override the law laid down by the Supreme Court in the case of Eskayef v. CIT [2000] 245 ITR 116. He therefore submitted that the view taken by the Appellate Tribunal is not correct and not in consonance with the decision of the Supreme Court. Mr. J. Narayanaswamy, learned counsel for the assessee, on the other hand, submitted that the assessee had incurred expenditure on advertise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public unless the deposits are invited in accordance with the rules made under the section and the statutory advertisement should contain the statement showing the financial position of the company and the advertisement shall be issued by the company in such form and in such manner as may be prescribed under the rules. Sub-section (4) of section 58A of the Companies Act provides that if any deposit is accepted in contravention of the rules, the company is required to return the amount of deposit and further, if there is any contravention in relation to the deposit, the company is also punishable with fine which may extend to Rs. 1,00,000 but shall not be less than Rs. 5,000. In other words, the company desiring to invite deposits from the public has to comply with the provisions of section 58A of the Companies Act and publish the advertisement in the form prescribed inviting deposits from the public. In other words, it is not open to the company to invite deposits in any other form. The statutory form prescribed is fairly a lengthy one under the Companies (Acceptance of Deposits) Rules, 1975, and it requires that the advertisement shall be made in a leading English newspaper and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act. The Central Board of Direct Taxes in Circular No. 240 dated May 17, 1978, has realised the position and issued the circular stating that the provision would not apply to the expenditure incurred by the taxpayer, inter alia, on the publication in any newspaper or any notice required to be published by or under any law. The above circular was noticed by the Madhya Pradesh High Court in CIT v. Mohd. Ishaque Gulam [1998] 232 ITR 869 and the court held that the circular clarifies the meaning of the expression, publicity and sales promotion. A similar question was considered by the Madhya Pradesh High Court in CIT v. M. P. State Handloom Weavers' Co-operative Society [1998] 233 ITR 62 and in the case before the Madhya Pradesh High Court, the State Government has issued directions under section 49C of the Madhya Pradesh Co-operative Societies Act, 1960, to all co-operative societies in the State to popularise the co-operative movement by effecting an advertisement and the co-operative society in question incurred certain expenditure towards propaganda and the question arose whether the expenditure incurred by the assessee for propaganda would constitute advertisement on sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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