1993 (7) TMI 146 - AT - Income Tax

Summary

Issues:
- Disallowance under section 37(3A) for the assessment year 1980-81 regarding expenditure on calendars
- Disallowance under section 37(3A) for expenses related to Southern Handicrafts presentations, cost of printing technical booklets, and cost of packing

Analysis:
1. The appeal was against the order of the CIT (A) upholding the IAC (Asst.)'s decision regarding disallowance under section 37(3A) for the assessment year 1980-81. The CIT (A) directed the Assessing Officer to ascertain the correct amount of expenditure incurred on calendars without disallowing under section 37(3A) any expenditure not related to advertisement, publicity, or sales promotion. The IAC (Asst.) found that a portion of the expenditure was on items other than calendars and reduced the disallowed amount from the total income. However, he sustained disallowances for expenses like southern handicrafts presentation items, cost of printing technical booklets, and cost of packing, totaling Rs. 2,92,575.

2. The CIT (A) confirmed the IAC (Asst.)'s decision, stating that the direction given by him did not cover other expenses, hence rejecting the assessee's contention. The assessee argued that the CIT (A) should have considered the grounds against disallowance under section 37(3A) for the specific expenses mentioned. The learned counsel for the assessee relied on a Tribunal decision that expenses like cost of printing technical booklets and packing were not covered under section 37(3A).

3. The Tribunal found that expenses related to Southern Handicrafts presentations, cost of printing technical booklets, and cost of packing were not for advertisement or sales promotion. The Tribunal noted that the CIT (A) did not address these specific expenses in his direction, leaving them for the Assessing Officer to decide. The Tribunal disagreed with the technical approach taken by the Assessing Officer and CIT (A) and referred to previous Tribunal orders supporting the assessee's position.

4. The Tribunal concluded that the CIT (A) was not justified in not considering the grounds raised by the assessee regarding the specific expenses. The Tribunal highlighted that the Assessing Officer had excluded certain expenses like handouts and booklets in a previous direction, indicating that these expenses should not fall under section 37(3A). Therefore, the Tribunal set aside the CIT (A)'s order and directed the Assessing Officer not to apply section 37(3A) to the expenses related to the mentioned items. As a result, the appeal was allowed.