TMI Blog1998 (6) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the ceiling prescribed under section 37(3A) is not applicable to these expenditure ?" In the statement of case the nature of the business carried on by the assessee has been set out by the Tribunal as under : "The assessee is a registered firm. The assessee was engaged in the business of dealing in cloth, wholesale and retail and it was running certain prize scheme under which there were about 20 prize groups of 200 members in each group contributing rupees ten per member. According to this scheme there will be a draw on the 15th of every month and the member winning a prize in the draw will be supplied goods to the extent of Rs. 150 which will be credited to the sales account and debited to the benefit scheme prize group account. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer and the view of the Tribunal, that the whole scheme was intended to raise working capital without the liability to pay interest thereon, and that the incentives offered to the members to enrol were really in the nature of payments made to the members in lieu of interest was clearly untenable. The total amount raised by the assessee by adopting these prize schemes was over rupees four lakhs. The members who were enrolled had at no point of time been told that in lieu of interest the members would receive prizes. On the other hand, in order to induce the prospective members to join the scheme these prizes have been offered as an incentive or inducement to create an impression in the minds of the prospective members that by enro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come within the purview of sales promotion and section 37(3A) would apply. This decision does not help the assessee but, on the other hand, supports the case of the Revenue. In the later case reported in CIT v. J and J Dechane Laboratories (P.) Ltd. [1996] 222 ITR 11 (AP), the court referring to its earlier decision in the case of Ampro Food Products [1995] 215 ITR 904, reiterated the view that the expenditure of the nature which is essential to the running of the business a bare minimum to carry on the trade would not fall within the meaning of the three expressions, advertisement, publicity and sales promotion. The court also held that the other expenditure incurred under any of the three heads would be within the mischief of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a draw the effect of which was to relieve them of their obligation to pay subscription for the remaining months. The prize scheme as also the offering of gifts at the time of enrolment was clearly meant to induce prospective customers to enrol. The fact that by these methods the assessee was also able to raise a substantial sum of over four lakh rupees which became available to him without the burden of having to pay interest thereon and that sum was available for use in his business or elsewhere does not in any way alter the fact that the amount so collected was collected by offering prizes which were really in the nature of sales promotion. The assessee himself had admitted that as the object of the prizes that had been offered by him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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