Law:

Section:

Section 37(3A), read with section 37(1), of the Income-tax Act, 1961 - Sales promotion - Expenditure on - Assessee, a manufacturer of biscuits, claimed deduction of expenditure of Rs. 2,32,656 incurred on distribution of free notebooks and gift coupons - ITO treating said amount as expenditure on sales promotion, disallowed part of it under section 37(3A) - Tribunal allowed deduction of entire expenditure under section 37(1) without recording finding whether impugned expenditure was incurred on sales promotion or not - Whether correctness of tribunal's decision allowing impugned expenditure under section 37(1) could not be adjudicated upon in absence of finding by tribunal on question as to whether said expenditure was incurred on sales promotion, and hence, it was a fit case for remand to tribunal for recording requisite finding - Held, yes Facts The assessee, a manufacturer of biscuits, claimed deduction under section 37(1) of the expenditure of Rs. 2,32,656 incurred on distribution of free note-books and gift coupons, but the ITO treated the said expenditure as an expenditure incurred by the assessee by way of sales promotion within the meaning of section 37(3A). On appeal, the AAC upheld the order of the ITO. On second appeal, the Tribunal, without expressing its opinion on the question whether the expenditure in question could be treated as an expenditure incurred on sales promotion or not, held that the said expenditure was not covered by section 37(3A) and that it had to be allowed as deduction under section 370). On reference by the revenue: Held Before the Court expressed its opinion on the question whether the Tribunal was right in holding that the expenditure in question was not covered by section 37(3A) and that it should be allowed in full under section 37(1), it was just and proper that the Tribunal should express its opinion on the question whether the expenditure in question could be treated as expenditure incurred on sales promotion or not. There should be factual finding first. Either the Tribunal would confirm the finding of the authorities below or differ. Accordingly, the case was sent back to the Tribunal to record the requisite finding.…

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