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TMI Blog1982 (11) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in India where such aggregate expenditure exceeds Rs. 40,000. 2. The assessee is a registered firm engaged in the business of film distribution, receiving commission based on collections of the pictures. During the previous year for the assessment year 1979-80, the assessee incurred expenditure on advertisement and publicity for purposes of its business. The aggregate expenditure exceeded half per cent of the gross receipts. The ITO made a disallowance of Rs. 29,002 working out the adjusted expenditure and computing 15 per cent thereof as the disallowance. 3. on appeal by the assessee, the AAC determined the adjusted expenditure at Rs. 53,028 as against Rs. 1,93,276 determined by the ITO. The AAC, however, rejected the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed under sub-section (3) ; (b) 'turnover' and 'gross receipts' mean turnover or gross receipts, as the case may be, as reduced by any discount or rebate allowed by the assessee." This provision restricting the business expenditure on advertisement, etc., was introduced for the first time in the assessment year 1979-80 and was in the statute book only for the two assessment years 1979-80 and 1980-81. The contention on behalf of the assessee is that the expression 'such aggregate expenditure' occurring in the clause 'so much of such aggregate expenditure as is equal to' means the aggregate expenditure in excess of Rs. 40,000 and, therefore, the disallowance to be made is only a percentage of that excess over Rs. 40,000, the assessee bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch' generally refers to its last antecedents and indicates something just before mentioned and in this provision it refers to the 'aggregate' mentioned in the preceding clause, i. e., aggregate in excess of Rs. 40,000. It is submitted that the Commissioner (Appeals) in the case of S. Veeriah Reddiar and Bheema & Sons had accepted the contention on behalf of the assessees that the disallowance under section 37(3A) is to be made on the amount in excess of Rs. 40,000 only. The assessee's representative adopting the reasoning of the Commissioner (Appeals) in those cases maintained that the words 'such aggregate' in the sub-section refers to the aggregate expenditure that exceeds Rs. 40,000 being the expenditure referred to in the immediate pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section, we find it difficult to accept the construction sought to be placed by the assessee on sub-section (3A). In order to appreciate the contention, we may briefly refer to the history of the legislation. Up to 31-3-1964, there was no specific provision for allowance or disallowance of expenditure incurred by a businessman on advertisement, etc. The allowability of each such expenditure was to be considered on the phraseology of the residuary provisions of section 37(1). The Finance Act, 1964 introduced a new sub-section (3) in section 37 providing that any such expenditure incurred after 31-3-1964 should be allowed only to the extent of and subject to such limits and/or conditions as may be prescribed. The limits referred to in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y marginal relief. That does not mean that the provision results in absurdity or anomaly. Sub-section (3A) was a measure for placing a curb on extravagant expenses in business and profession. It only deals with the case of an assessee who incurs expenditure in India on advertisement, publicity and sales promotion exceeding Rs. 40,000 in the aggregate. The section does not apply to the cast of an assessee who holds such expenditure below the limit. In that case the existing provisions in sub-section (3) apply. Therefore, there is no anomaly in the new provision. It is well settled that there is no equity about tax. If the language of the statute is clear and unambiguous and if two interpretations are not reasonably possible, it would be wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the total expenditure on advertisement, etc., in the case of an assessee, who incurs such expenditure in the aggregate exceeding Rs. 40,000. The word 'such' generally refers to its last antecedent. When the word 'such' is used before a noun in the latter part of a sentence the proper construction is to hold that the same noun is being used after the word 'such' with all the characteristics which might have been indicated earlier in the same sentence. Therefore, 'such aggregate expenditure' in the latter part of the sub-section refers to the aggregate expenditure incurred by the assessee on advertisement, etc., at a figure exceeding Rs. 40,000, this being the characteristic of the expenditure indicated in the earlier part of the sentence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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