Law: Income Tax Act, 1961

Section: 256(2),37(3A)

Income-tax--- ----Reference---Business expenditure---Advertisement expenditure---Assessee, well established old company, manufacturing aerated waters, soft drinks and non-alcoholic beverages---Investing large amounts on, new machinery and capital goods for introducing new product---Amount spent on advertisement in connection therewith---Tribunal finding that assessee not new undertaking and not entitled to the exception provided by section 37(3D)---Finding of Tribunal is a fording of fact---No question of law arose for reference---Indian Income Tax Act, 1961, Ss.37(3A), (3D), 256(2). The assessee which manufactured aerated waters, soft drinks and non­alcoholic beverages claimed for the assessment year 1980-81, deduction of the amount spent on advertisements of a new-product on the ground that it had invested large amounts of money on new machinery and capital goods for introducing the new product which fell within the exception provided by subsection (3D) of section 37 of the Income Tax Act, 1961. The Income Tax Officer disallowed the claim of the assessee. The Tribunal affirmed the order of the Income Tax Officer. On a reference under section 256(2): Held, that subsection (3D) of section 37 clearly indicates that the exception in the subsection from the operation of subsection (3A) will be available to an undertaking which is new and which otherwise qualifies in terms of the provisions made in subsection (3D). The assessee was a well-established old company which would not qualify as a new undertaking. Therefore, mere investment on new machinery and capital goods would not entitle the assessee to claim it to be a new undertaking within the meaning of subsection (3D) of section 37 of the Income Tax Act, 1961. The finding of the Tribunal was a finding of fact and no question of law arose for reference. JUDGMENT M. P. CHANDRAKANTHARAJ URS. J.---This petition under section 256(2) of the Income Tax Act, 1961, is filed by the assessee aggrieved by the order of the assessing authority, affirmed by the first appellate authority as well as the Tribunal and, having failed to obtain a reference by the Tribunal of the questions of law which arise for considerations as…

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