TMI Blog1991 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... cer under section 143(3) of the Act on 28-1-1986. In the said assessment order the Assessing Officer allowed the commission paid to sales agents amounting to Rs. 52,38,614 and also the commission paid to advertising agents amounting to Rs. 2,49,067 being expenditure for the purpose of business. The Assessing Officer also allowed the claim of repairing and maintenance expenses claimed by the assessee at Rs. 7,01,273. 3. On examination of the assessment records of this assessment year 1985-86, it was noticed by the CIT that the Assessing Officer had not properly taken into account the above expenses which would otherwise be disallowable under the provisions of section 37(3A) of the Act. Omission to do so on the part of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no machinery. 4. The assessee is aggrieved and has come up in appeal before the Tribunal. Sri R.N. Bajoria, learned counsel, appeared for the assessee. According to him, there was no error or prejudice caused to the revenue by the order of the Assessing Officer. The assessee has been paying commission to selling agents in the normal course to advertising agencies, advertisers, local selling agents, outstation selling agents, Central/State Governments, Railways, Public Sector undertakings, etc. and the bills have been raised after allowing commission/trade discount as per usual trade agreements with them. Advertisement and sales bills are raised and accounted for in the books of account on the basis of net amount and disclosure of the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per further details given at pages 47, 49, 51 and 53 of the paper book. Elaborating further it is submitted that these spare parts were mostly imported items and duly supported by Bill of Lading and the Customers Clearance made by the assessee. In such a case it is submitted that these items could not be treated as in the nature of machinery of capital nature. It is also pointed to us that the details were duly given in the Annual Report for the year ending 1984 at page 76 under the head " Other expenses " as repairs and maintenance for plant and machinery and further details have been incorporated at page 78 under the head " Notes on accounts ". These items have not been capitalized by the assessee as they are in the nature of spare par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... newspaper business. Similarly, the commission to advertising agents and canvassers were paid for the business secured by them. Such payment was either made purely on commission basis or partly on retaining basis. The genuineness of the payment and the services rendered have not been doubted. The only issue that falls for our consideration is whether these expenses will assume the character of 'sales promotion' as contemplated under section 37(3A) of the Act. The term 'sales promotion' used in section 37(3A) came up before the Tribunal in the case of Mopeds India Ltd. v. IAC [1984] 7 ITD 324 (Hyd.) and in that it was held as follows : " A selling agent's commission, in our opinion, can never be treated as an outlay on advertisement, publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Similar view has been taken by the Tribunal, Calcutta Bench in the case of Bata India Ltd. [IT Appeal Nos. 1392 and 1393 (Cal.) of 1988, dated 13-12-1989]. Identical issue came up before the Tribunal in the case of the well-known newspaper Statesman Ltd. [IT Appeal No. 917 (Cal.) of 1988]. In that case under similar circumstances the Commissioner invoked the provisions of section 263 and directed the Assessing Officer to apply the provisions of section 37(3A) of the Act on the above items. The Tribunal after elaborate discussion of the provisions of the Act and the relevant decisions on the point held as follows : " 17. In view of above discussion and background, we are unable to hold that the commission paid to sales agents or advert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e elaborately and held that brokerage and commission paid for selling goods will not come within the mischief of the phrase " advertisement, publicity and sales promotion " under section 37(3A) of the Act. 8. Respectfully following the above decisions we hold that the provisions of section 37(3A) of the Act were not at all applicable to the expenses in question and, therefore, the order of the Assessing Officer cannot be said to be erroneous and prejudicial to the interest of the revenue. In that view of the matter, the learned Commissioner has not correctly assumed the jurisdiction and his order is liable to be vacated on this point. 9. With regard to the direction given by the Commissioner regarding purchase of machinery of a capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
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