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TMI Blog1990 (5) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... also be considered for the purpose of disallowance under s. 37(3A). Thus, he worked out the excess over the admissible amount at Rs. 78,044. This was added back. 4. The assessee appealed. The Commissioner(A) held that the term 'sales promotion' would include payment of commission and brokerage because they were also in the nature of sales promotion. 5. The assessee is on further appeal. Shri Syali, learned counsel for the assessee submitted that the assessee company was manufacturing iron and steel products, i.e., tor steel, tor rounds, etc. It is marketed under the brand name K.L.Tor. Several distributors and brokers have been appointed for marketing this product. A major portion of the goods has to be marketed through distributors and brokers as it was not feasible to open retail depots in different part ofDelhiand its surrounding areas. These distributors were rendering various services to the company like that of procurement of order, execution of order, collection of payment, etc. The distributors have their own godowns for keeping the materials. For rendering all these services, the company pays them remuneration in the form of commission and brokerage. He then submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 37(3B). Similar in lines is an expenditure for services rendered on a person who is other than an employee who should in turn render certain services to the assessee. Such expenditure has to be distinguished from the types of expenditure visualized under this section. We will, therefore, hold that the commission and brokerage paid by the assessee for services rendered could not be considered for the purpose of disallowance under s. 37(3A). 8. The next question for consideration is the disallowance under s. 43B. The ITO found that the assessee had incurred the following liabilities which, however, were not clear and were outstanding at the end of the accounting year: (i) Employees, contribution to provident fund Rs. 16,429.00 (ii) Employees, contribution to ESI Rs. 8,900.00 (iii) General sales-tax Rs. 38,528.00 (iv) Central sales-tax Rs. 7,652.00 . Rs. 71,509.00 The ITO was of opinion that this amount will have to be disallowed under s. 43B. It was submitted that sales tax is not debited to the profit and loss account and so s. 43B would not be a applicable. He rejected this submission by point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of S. Subba Rao Co. vs. Union of Indian (1988) 71 CTR (AP) 34 : (1988) 173 ITR 708 (AP) would not be applicable. The retrospective amendment has nullified these decisions. 12. Shri Syali has, however, made one further submission. He has pointed out that a proviso has been introduced w.e.f. 11th day of April, 1988. This proviso says that there would be no disallowance, if the sales tax liability is actually paid on or before the due date for filing the income-tax return under s. 139(1). He submitted that the proviso expresses the intention of the Legislature. He also referred to the Memorandum explaining the provisions in the Finance Bill, 1989 and pointed out that this proviso had been introduced to remove the hardship caused to taxpayers who had represented that since sales tax for the last quarter cannot be paid within that previous year, the original provisions of s. 43B would unnecessarily involve disallowance. He submitted that the proviso contains the declaration of the intention of the Legislature. He further submitted that introduction of Expln. by the 1989 Act does not whittle down the intention of the Legislature. Therefore, the Expln. would not enable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caused by the section. But to decide whether the proviso was declaratory or not, one should read the following paragraph also coming immediately after the paragraph quoted above: "Certain courts have interpreted the provisions of s. 43B in a manner which may negate the very operation of this section. The interpretation given by these courts revolves around the use of the words is that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. This is against the legislative intent and it is, therefore, proposed by way of a classificatory amendment and for removal of doubts, that the words, "any sum payable" be defined to mean any sum, liability for which was been incurred by the taxpayer during the previous year irrespective of date of which such sum is statutorily payable". It would be seen that the legislative intent is expressly given and it says that the interpretation given by certain courts regarding the expression "any sum payable" did not convey the intention of the Legislature. So they wanted to make it clear that the date by which such sum statutorily payable was totally irrelevant. Thus, the memorandum giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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