1994 (10) TMI 89 - AT - Income Tax

Advertisement Expenditure, Assessment Year, Expenditure On Advertisement, Non Obstante Clause

Summary

Issues:
- Whether any disallowance can be made under section 37(3A) of the Income-tax Act, 1961 in respect of the expenditure on advertisement.

Analysis:
1. The appeal in question revolved around the issue of disallowance under section 37(3A) of the Income-tax Act, 1961 concerning expenditure on advertisement. The Tribunal originally decided on the matter but recalled it to consider the alternative contention of the assessee, specifically focusing on the legality of disallowance under section 37(3A.

2. The appellant argued that no disallowance could be made under sub-section (3A) of section 37 for advertisement expenditure, contending that sub-section (3A) does not override sub-section (3) and that advertisement expenditure is allowable under section 37(3). The appellant relied on a previous Tribunal decision in Bajaj Electricals Ltd. case to support this argument. However, the Departmental Representative supported the order of the Commissioner of Income-tax (Appeals).

3. The Tribunal analyzed the Bajaj Electricals Ltd. case where it was held that advertisement expenditure is allowable under sub-section (3) of section 37, thus no disallowance under section 37(3A) can be made. Contrarily, the Teksons (P.) Ltd. case argued that advertisement expenditure is allowable under section 37(1) and sub-section (3) only restricts the allowance. After careful consideration, the Tribunal favored the view in the Teksons (P.) Ltd. case, emphasizing that section 37(3) is a non obstante clause with reference to section 37(1), indicating that advertisement expenditure is allowable under section 37(1).

4. The Tribunal further explained that the intention of the Legislature was to curtail lavish expenditure by trade and industry, particularly on advertisement, as evident from the Finance Minister's speech. The Tribunal highlighted the importance of harmonious construction in interpreting the legislation to avoid making any section redundant. It was concluded that the interpretation forwarded by the assessee, limiting advertisement expenditure allowance to sub-section (3), was not acceptable.

5. Ultimately, the Tribunal dismissed the appeal of the assessee based on the detailed analysis and interpretation of the relevant provisions of the Income-tax Act, upholding the view taken in the Teksons (P.) Ltd. case regarding the allowance of advertisement expenditure under section 37(1) and the restrictions imposed by sub-sections 2 to 5.