Expenditure on advertisement in souvenirs - Allowance thereof as admissible deduction - Income Tax - 19/1969

Circular No. 19 Dated 13/6/1969 SECTION 37(3) - EXPENDITURE ON ADVERTISEMENT/ MAINTENANCE OF GUEST HOUSE/TRAVELLING Expenditure on advertisement in souvenirs - Allowance thereof as admissible deduction clarification 1 1. Reference is invited to Boards Circular No. 200, dated 28-6-1976 [Clarification 2] by which it was clarified that no distinction need be drawn between expenditure on advertisements in souvenirs and other types of advertisement. 2. A question has been raised as to whether an assessee can resort to publicity in more than one souvenir published by the same institution/organisation. Souvenirs are one of the recognised media of publicity. A businessman can advertise in more than one newspaper or magazine and also in more than one issue of the same newspaper or magazine. Expenditure on such advertisements will qualify for deduction under section 37(3) read with rule 6B of the Income-tax Rules. Similarly, if advertisements have been released in more than one souvenir published by the same organisation, deduction in respect of such publicity will be admissible provided aforesaid conditions are satisfied. Circular : No. 203 [F. No. 204/29/76-IT(A-II)], dated 16-7-1976. clarification 2 1. Attention is invited to Boards Circular No. 19 [F. No. 9/20/69-IT(A-II)], dated 13-6-1969 [Clarification 3] on the above subject. 2. It has been represented to the Board that expenditure on advertisements in souvenirs is expenditure incurred wholly and exclusively for the purpose of business and as such is allowable as a deduction under section 37(1). Disallowance of a part of expenditure on advertisement in souvenirs by the Income-tax Officer on the ground that it is in the nature of donation has caused hardship to the assessees and has caused avoidable litigation. 3. The Board has re-examined the question in the light of the representations made. It is clarified that no distinction need be drawn between expenditure on advertisements in souvenirs and other types of advertisements. Claims in respect of expenditure on advertisements in souvenirs may be allowed if the conditions laid down in rule 6B of the Income-tax Rules are fulfilled and there is evidence that the expenditure has been incurred. Circular : No. 200 [F. No. 204/29/76-IT(A-II)], dated 28-6-1976. clarification 3 1. It has been represented to the Board that expenditure incurred by businessmen on advertisements in souvenirs by trade, commerce and industry should be allowed in full in the same manner as expenditure on advertisements in newspapers since the purpose of both kinds of advertisements is identical. 2. The matter has been examined. The position, in law, is that expenditure on advertisements in souvenirs by trade, commerce and industry will be admissible in full if it can be said to have been laid out wholly and exclusively for the purpose of business. Rule 6B of the Income-tax Rules, which lays down the extent and the conditions subject to which expenditure on advertisement is to be allowed under section 37(3), does not bar the allowance of expenditure on advertisements in souvenirs, etc., in full. It is only where donations are given inthe garb of advertisement expenses that the expenditure is inadmissible. Even in such cases, the donations should be considered for relief under section 80G, if the conditions mentioned in that section are fulfilled. Circular : No. 19 [F. No. 9/20/69-IT(A-II)], dated 13-6-1969.