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1. Deductibility of the amount spent on a sculpture as expenditure on advertisement, publicity, and propaganda. Detailed Analysis: The judgment pertains to an appeal by an assessee regarding the deductibility of Rs. 2 lakhs spent on a sculpture in Calcutta as expenditure on advertisement, publicity, and propaganda. The assessee, a company manufacturing medicines including the popular product "Boroline," engaged an artist to sculpt a 30 feet statue for installation at a prominent intersection in Calcutta. The statue prominently displayed the name "Boroline" and was unveiled by the Governor, aiming to enhance the company's goodwill and attract public attention. The Income Tax Officer disallowed the expenditure, deeming it irrelevant to profit-earning. The CIT(A) upheld the disallowance, emphasizing the goodwill enhancement. The assessee contended, citing precedents, that the expenditure was for propaganda and publicity. The ITAT, after considering the contentions, allowed the deduction, noting the statue's advertisement value due to the prominent display of "Boroline" and its strategic location for public visibility. The ITAT's decision was based on various factors. Firstly, the statue's display of "Boroline" at key locations ensured visibility and attention from passers-by, contributing to propaganda and publicity. The judgment referenced the Calcutta High Court's ruling that advertisements are crucial for business promotion and fall under "commercial expediency." The ITAT also cited a Rajasthan High Court case where expenditure on a fountain for beautification was allowed as business expenditure due to advertisement value. The ITAT emphasized that the immediate purpose of the expenditure was advertising, even if it indirectly enhanced goodwill. The judgment highlighted the wide scope of "for the purpose of the business," as explained by the Supreme Court, encompassing acts like advertisement to attract more business. Ultimately, the ITAT allowed the appeal, considering the expenditure as deductible under section 37(1) for being incurred wholly and exclusively for business purposes, despite its beautification aspect. In conclusion, the ITAT ruled in favor of the assessee, allowing the deduction of the expenditure on the sculpture as it served the purpose of advertisement, publicity, and propaganda for the company's product "Boroline." The judgment emphasized the advertisement value of the statue, strategic location for public visibility, and the wide interpretation of business purpose under section 37(1) to include activities like advertisement to attract more business.
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