1995 (11) TMI 31 - HC - Income Tax

Advertisement Expenditure, Business Expenditure, Expenditure On Advertisement, Question Of Law, Tribunal s Order

Summary

Issues:
Interpretation of section 37(2B) of the Income-tax Act, 1961 regarding the deductibility of expenditure incurred for putting up a stall at an exhibition in connection with a political celebration.

Analysis:
The case involved a petition under section 256(2) of the Income-tax Act, 1961, for the assessment year 1987-88, where the assessee sought to refer a question regarding the deductibility of expenditure incurred for setting up a stall at an exhibition related to a political celebration. The assessee claimed the expenditure as a business expense to promote its image and goodwill. However, the Assessing Officer disallowed the expenditure under section 37(2B) of the Act, considering it as an indirect contribution to a political party. The Commissioner (Appeals) and the Income-tax Appellate Tribunal upheld the disallowance, treating the expenditure as advertisement expenditure. The Tribunal's decision lacked a detailed discussion of the law and evidence on record, leading to a challenge on the interpretation of section 37(2B) and the factual applicability of the provision.

The court observed that section 37(2B) of the Act prohibits deductions for expenses on advertisement in publications by political parties. The court noted that the Tribunal's decision lacked a proper analysis of the law and evidence, and the finding that the expenditure was advertisement expenditure was not adequately supported. The court held that the interpretation of section 37(2B) and its application to the facts of the case raised a question of law. Therefore, the court directed the Tribunal to refer the question for the court's opinion, indicating that the question proposed was indeed a question of law. As a result, the court allowed the petition without imposing any costs on the parties involved.