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TMI Blog1997 (10) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... commission at Rs. 12,43,511, did not fall within the expression 'advertisement, publicity and sales promotion' which appear in s. 37(3A) of the IT Act, 1961? (2) Whether the Tribunal was right in law to hold that the expenditure even if of the nature of sales promotion, were not of the nature of advertisement and publicity and hence, could not be said to be expenditure to which provision of s. 37(3A) and 37(3B) of the Act could be applied? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the order under s. 263 dt. 25th March, 1988?" 2. The brief facts giving rise to this reference are that the assessee is a manufacturer of bidies. The assessment order dt. 4th April, 1986 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----- 18,20,682 --------- It was contended before CIT(A) that the aforesaid expenses did not fall within the ambit of 'sales promotion' but were the expenses incurred on actual sales and as such the expenses were business expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer of this Court. 5. Though s. 37(3A) now has been deleted, but at the relevant time, the section as it stood, reads as under: "(3A) Notwithstanding anything contained in sub-s. (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-s. (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". The relevant portion of s. 37(3B) reads as under: "(3B) The expenditure, referred to in sub-s. (3A) is that incurred on - (i) advertisement, publicity and sales promotion; or" Therefore, the question was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch expenditure in the computation of taxable profits. The main features of the new sub-s. (3A) read with related sub-ss. (3B), (3C) and (3D) inserted in s. 37 are as follows: (a) The provision for the disallowance of a specified portion of such expenditure will apply only in relation to expenditure on advertisement, publicity and sales promotion in India. (b) Although this provision will apply to all categories of taxpayers carrying on any business or profession, no disallowance will be made in cases where the aggregate amount of such expenditure does not exceed Rs. 40,000. (c) Where a taxpayer has set up an industrial undertaking for the manufacture or production of any article, no disallowance will be made under this provision in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circular shows that the terms 'publicity' and 'sales promotion ' have been further clarified. It has been observed that both these expressions have a wide amplitude and the expenditure incurred by taxpayers on fashion shows, beauty contests, consumer contests, consumer gift offers and free samples gifts fall within the ambit of new sub-s. (3A) of s. 37 of the Act. But the brokerage paid to the commission agent does not fall in any of the categories enumerated above by the circular. If, in the interpretation, payment of brokerage to the commission agent is to be included, then there is no reason why this could not have been included as one of the categories of sales promotion but that was not done deliberately so as not to give a very e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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