2010 (4) TMI 298 - HC - Income Tax

Nature of expenditure business promotion versus advertisement Rule 6B the assessee-respondent has claimed expenditure of Rs. 1,05,306/- on account of export promotion, publicity expenses and advertisement outside India. Another sum of Rs. 37,933 was also claimed for article presented or intended for presentation where expenditure on each article had exceeded Rs. 50/-. - Held that - Rule 6-B (1) envisages permissible allowance in respect of advertisement and then it goes on specifying those item. It is obvious from the plain reading of the Rule 6B (1) (a) that allowance in respect of expenditure on advertisement must not exceed the pecuniary limit specified. - an article for presentation meant for sale promotion would not attract the application of Rule 6B and cannot on that count qualify for disallowance.

Summary

Issues:
Challenge under Section 260A of the Income Tax Act, 1961 regarding disallowance of expenses under Rule 6-B for the assessment year 1989-90.

Analysis:
The Revenue challenged the order of the Income-tax Appellate Tribunal regarding the disallowance of expenses under Rule 6-B for the assessment year 1989-90. The key question raised was whether the expenditure incurred by the assessee on presentation of articles without the company's logo was meant for advertisement or business promotion. The Tribunal had dismissed the Revenue's appeal, leading to the matter being brought before the High Court.

The Assessing Officer disallowed expenses on articles without the company's logo under Rule 6-B, stating that such items lacked publicity value. The CIT(A) disagreed and allowed the expenses, emphasizing that they were for business promotion. The Tribunal upheld the CIT(A)'s decision, citing previous judgments in favor of the assessee. The Tribunal held that Rule 6-B did not apply as the purpose of presenting the gifts was business promotion, not advertisement.

The High Court analyzed Rule 6-B, emphasizing that it strictly applies to expenditure on advertisement. The Court noted that for an article intended for presentation to qualify as advertisement, it must bear the company's logo. Therefore, items meant for sale promotion, not advertisement, are not subject to Rule 6-B disallowance. Consequently, the Court ruled in favor of the assessee, upholding the Tribunal's decision and dismissing the Revenue's appeal.

In conclusion, the High Court upheld the Tribunal's order, answering the substantive question of law against the Revenue and in favor of the assessee. The judgment was delivered on April 26, 2010, by Hon'ble Mr. Justice M.M. Kumar and Hon'ble Mr. Justice Jitendra Chauhan.