No expenditure allowable for and from the assessment year 1979-80. - Income Tax - 1258/CBDT

INSTRUCTION NO. 1258/CBDT Dated : May 15, 1979 Section(s) Referred: 37 , Rule 6B of IT Rules Statute: Income - Tax Act, 1961 Sub-section (2B) of section 37 of the Income-tax Act, 1961 as amended by the Taxation Laws (Amendment) Act, 1978 provides for the disallowance of expenditure incurred by an assessee on advertisement in any souvenir brochure, tract, pamphlet or the like published by a political party. This amendment is operative from the 1st April, 1979. Sub-section (3A) of section 37, which was inserted by the Finance Act, 1978 and which also takes effect from the 1st April, 1979, imposes a ceiling on expenditure on advertisement, publicity and promotion of sales. The instructions on the treatment of advertisements in souvenirs in the Board's Circulars No.19, No.200 and No.203, dated the 13th June, 1969, 28th June and 16th July, 1976 respectively necessarily stand modified in the light of these two amendments. 2. The expenditure on advertisements in souvenirs, etc., published by institution/organisations can be allowed under sub-section (1) of section 37 of the Income-tax Act, if the same can be said to have been laid out wholly and exclusively for the purposes of business and if the conditions as laid down in rule 6B of Income-tax Rules, 1962 are fulfilled. Thus in examining the claim for allowance of such expenses the income-tax officers should carefully examine whether the payments made for such advertisements are for any oblique purpose or are donations in the garb of advertisements which will take them outside the ambit of the said section/rule. The effect of the advertisements which will take them outside the ambit of the said section/rule. The effect of the advertisements not appearing at all or appearing after an unreasonably long time may indicate the existence of an oblique purpose unconnected with the legitimate business needs of the assessee. The question of actual allowance of the payments and deduction in any particular year would also depend upon the system of accounting followed and the relevant facts of each case. Before allowing claims on advertisements in souvenirs, etc., the Income-tax Officers are expected to keep all these facts in mind. 3. Further, in view of the changed position of law, no expenditure on advertisements in souvenirs, etc., published by a political party would be allowable for and from the assessment year 1979-80.