Law: Income Tax Act, 1961

Section: 37,37(3A)

Income-tax---Business expenditure---Disallowance---Expenditure on advertisement or sales promotion--- Government company incorporated for promoting industrial development---Expenditure incurred on brochure, etc. was not on advertisement of sales promotion---No disallowance under S.37(3-A) can be made---Indian Income-tax Act, 1961, S.37(3-A). For the assessment year 1979-80 the assessee, a Government company incorporated with the object of promoting industrial development in the State of Andhra Pradesh, incurred expenditure of Rs.42,059 towards publicity activity. The Income-tax Officer allowed Rs.40,000 and disallowed 1/10th of the total advertisement expenses under section 37(3-A) of the Income Tax Act, 1961. On appeal, the Commissioner (Appeals) held that the expenditure was not publicity expenditure but the expenditure incurred to promote the growth of industries in Andhra Pradesh and, therefore, the provisions of section 37(3-A) were not attracted. On appeal by the Revenue, the Tribunal on a consideration of the brochure styled "Compendium of the A.P.S.S.I.D.C. Services" agreed with the view of the Commissioner (Appeals). On a reference: Held, that the Tribunal on a consideration of the brochure found that the expenditure incurred, by- the assessee enabled the State to promote small scale industries and also enabled small scale industries to obtain loans and various other, facilities from the Corporation. The Tribunal found that the expenditure incurred was meant for notifying the entrepreneurs and small scale industries to participate in the industrial development of the State. The activity of the assessee could not be said to, be advertisement or sales promotion or publicity and so section 37(3A) was not applicable. JUDGMENT MS. S. V. MARUTHI, J.---At the instance of the Revenue question No.2 is referred, which is as follows:--- "(2) Whether,' on the facts and in the circumstances of the case, the expenditure of Rs.42,059 cannot be categorized either as advertisement or publicity or sales promotion expenditure and consequently whether the Income-tax Appellate Tribunal is justified in holding that the disallowance under section 37(3-A) of Rs.4,260 is not…

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