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Issues:
Interpretation of provisions of s. 37(3A) of the ITA, 1961 regarding sales promotion expenses and their applicability to sales commission and sales discount. Analysis: The judgment involves three appeals by the assessee concerning the allowance of revenue deduction for sales commission and sales discount in their assessments. The CIT, Madurai invoked s. 263 of the ITA, 1961, finding the Assessing Officer's failure to apply s. 37(3A) to the payments, deeming the assessment orders prejudicial to Revenue. The assessee argued before the CIT that sales commission and sales discount did not qualify as sales promotion expenses, citing ITAT decisions in their favor. However, the CIT disagreed and passed orders under s. 263, leading to the appeals before the tribunal. The assessee contended that sales commission and sales discount should not be considered sales promotion expenses as they are incurred during sales transactions and are common trade practices. They referenced ITAT decisions in similar cases to support their argument. The Departmental Representative supported the CIT's orders, arguing that the nature of duties performed by agents and the impact of sales discount on promoting sales justified the application of s. 37(3A). After considering the submissions and relevant case law, the tribunal agreed with the assessee's position. The tribunal held that sales commission for agent duties and sales discount, being common trade practices, did not fall under the ambit of s. 37(3A) intended to curb extravagant promotional expenses. The tribunal differentiated between sales promotion activities targeting the market as a whole and sales commission/discount related to individual sales transactions. It emphasized that assessing authorities could disallow excessive commission/discount but found no such issue in the present case. Consequently, the tribunal set aside the CIT's orders and reinstated those of the Assessing Officers, allowing the appeals filed by the assessee.
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