2007 (9) TMI 631 - HC - Income Tax

Expenditure on the annual bonus - Whether ITAT was correct on the facts and in the law in holding the expenditure being the annual bonus paid to the dealers is not in the nature of Sales Promotion expenses and the provisions of section 37(3A) of the Income-tax Act are not applicable? - HELD THA - The admitted position is that in view of the decision of this Court in CIT v. High Blyma Labs (P.) Ltd. the question of law is required to be answered in the affirmative in favour of the assessee and against the revenue. Thus the reference is disposed of accordingly.

Summary

Issues:
Question of law regarding the nature of expenditure for annual bonus paid to dealers and applicability of section 37(3A) of the Income-tax Act for the assessment year 1980-81.

Analysis:
For the assessment year 1980-81, the High Court was tasked with determining whether the expenditure of &8377; 73,116, which constituted the annual bonus paid to dealers, should be classified as "Sales Promotion" expenses and whether the provisions of section 37(3A) of the Income-tax Act are applicable. The Court referred to a previous decision in CIT v. High Blyma Labs (P.) Ltd., where it was established that such expenses were not to be considered as "Sales Promotion" expenses. Consequently, the Court held that the ITAT was correct in its decision and that the question of law should be answered in the affirmative, in favor of the assessee and against the revenue. Therefore, the reference was disposed of accordingly, affirming the position regarding the nature of the expenditure and the applicability of the relevant tax provisions for the given assessment year.