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Issues:
- Interpretation of section 37(3A) of the Income-tax Act, 1961 regarding expenditure incurred by a private limited company on printing and distributing booklets explaining its products. Analysis: 1. The only issue raised in the appeals was whether the provisions of section 37(3A) of the Income-tax Act, 1961 would apply to the expenditure incurred by the assessee company on printing and distributing booklets explaining its products. 2. For the assessment year 1979-80, the company had incurred a total expenditure under 'Advertisement'. The company admitted that a portion of the expenditure would be subject to section 37(3A), but claimed that the rest was solely for printing and distributing pamphlets explaining its products. Both the ITO and the Commissioner rejected this claim. 3. In the assessment year 1980-81, a similar situation arose where the company incurred total expenditure, part of which was admitted to be subject to section 37(3A. The ITO included additional expenditure for consideration, leading to a dispute. 4. The company argued that the expenditure on printing and distributing booklets should not be considered as advertisement, publicity, or sales promotion under section 37(3A). They contended that the booklets were informative and akin to catalogues or journals, thus falling under the exemption clause of section 37(3B)(vii). 5. The Tribunal analyzed the facts and held that the provisions of section 37(3A) would indeed be applicable to the expenditure incurred by the company. They emphasized that any expenditure on advertisement, publicity, or sales promotion would fall under this section, including printed matter explaining the products. 6. The Tribunal then examined whether the company could still claim deduction under section 37(3B) despite the application of section 37(3A. Section 37(3B) exempts expenditure on publication and distribution of journals, catalogues, or price lists. The Tribunal concluded that the printed booklets did not qualify as catalogues based on the definition and structure required. 7. Further, the Tribunal explored whether the booklets could be considered as journals. They defined a journal as a record of daily transactions or events, and noted that a journal must have an element of reporting happenings. The Tribunal found that the booklets served as a combination of advertisement and journal, reporting research, experiments, and advocating product use. 8. Ultimately, the Tribunal ruled in favor of the assessee, allowing the appeals. They determined that the printed booklets explaining the products could be considered as journals for the purpose of section 37(3B), meeting the criteria of reporting happenings and serving as a promotional tool simultaneously.
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