Law:

Section:

Section 37(3A) of the Income-tax Act, 1961 - Sales promotion expenses - Assessment year 1985-86 - Whether amount paid to selling agents in addition to regular commission or discount on sale beyond particular limit, is nothing but for promoting sales and, hence, should be taken into account for calculating disallowance under section 37(3A)/37(3B) - Held, yes Section 37(3B) of the Income-tax Act, 1961 - Motor car expenses - Assessment year 1985-86 - Whether expenditure on maintenance of delivery van, motor cycle and scooter would be hit by provisions of section 37(3A)/37(3B) - Held, no FACTS The assessee incurred certain expenditure towards payment to its selling agents on the sales made through them. The Assessing Officer treated it as sales promotion expenses and invoked the provisions of section 37(3A). The Commissioner (Appeals) upheld the view taken by the Assessing Officer. But the Tribunal allowed the claim of the assessee. The Tribunal also deleted certain amount, being expenditure incurred on maintenance of delivery van, motor cycle and scooter for calculating the disallowance under section 37(3A)/37(3B). On reference, the assessee contended that the provisions of the concerned section could be invoked only in the case of motor cars and not in the case of vans. On reference : HELD The facts were not in dispute that the payment of the amount was made to the agents not only for the sales effected but it was the payment made to the agents in addition to the rebate or discount or commission already paid for the regular sales made by them, which was beyond certain limits. When the incentive is given for more and more purchase or sale it is nothing but for promotion of sale. The Tribunal was not justified in reversing the view taken by the Assessing Officer and the Commissioner (Appeals). When the amount in question was undisputedly paid in addition to the regular commission or discount on a sale beyond particular limit, that was nothing but for promoting the sale. As regards the expenditure incurred on maintenance of delivery van, motor cycle and scooter, the Tribunal was justified in deleting the same for calculating the disallowance under section…

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