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TMI Blog1991 (9) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the disallowance was excessive. In our opinion, when there are 5 partners, the disallowance of 1/4th vehicle maintenance expenses and depreciation is eminently justified and is hereby confirmed. 4. Ground No. 4 upholding the disallowance of Rs. 2,500 out of telephone expenses was not pressed at the time of hearing and is, therefore, treated as dismissed. 5.Ground No. 5, is with regard to the charging of interest under section 217 of the Act. At the time of hearing, Shri Aggarwal submitted that this ground was merely consequential in nature. The assessing officer is, therefore, directed to charge interest under section 217 on the total income of the assessee as determined by this order. 6. Now, we come to the main issue which is contained in Ground No. 1 of the assessee's appeal. 7. Brief facts of the case are that in the trading account, the assessee showed an expenditure of Rs. 8,27,465 on sales promotion. This item of expenditure normally appears on the Profit Loss A/c. The assessing officer, therefore, examined the nature of these expenses and found that the total payments of sales promotion expenses actually amounted to Rs. 52,34,829. The sales promotion receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived on account of sales promotion expenses and that in the fitness of things only the net amount of Rs. 8,27,465 had to be considered for the purposes of section 37(3A) of the Act. Relying on the decision of the Supreme Court in Keshavji Ravji Co. v. CIT [1990] 183 ITR 1, it was submitted that the Court had to make an equitable construction of a taxing statute and that in the present case only the net amount had to be considered for the purposes of section 37(3A). The Ld. Counsel submitted that in the earlier years also the assessee firm had charged amounts towards sales promotion expenses from the sub-dealers, but since a provision like section 37(3A) was not on the statute book and the profits of the assessee were in no way affected, the entries were not properly and perfectly reflected in the books of account. It was vehemently argued that in the assessees case, disallowance under section 37(3A) should be restricted to the net amount of Rs. 8,27,465. 10. The Ld. D.R. on the other hand, strongly supported the orders of the departmental authorities. It was submitted that there was no agreement between the assessee and the sub-dealers for charging sales promotion expenses se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trend in juristic thought. In this judgment, the Supreme Court also explained the well-established rule of contemporanea expositio and held that the contemporaneous instructions issued by the authorities entrusted with the task of administering the taxing statute can certainly be taken into account in construing the object of a provision of law. 12. From the above, it is clear that while examining this case, we have to see whether the purpose for which section 37(3A) was enacted is advanced or thwarted by the action of the assessee. 13. We may mention at this stage that the facts in the case of Keshavji Ravji Co. are distinguishable. In that case, the question was whether in the case of interest paid by the firm to the partners and the interest received by the firm from the partners the net amount of interest should be disallowed under section 40(b) of the Act or the amount paid by the firm to the partners alone should he disallowed. The Supreme Court held that on an equitable construction, only the net amount of interest should be allowed under section 40(b) of the Act. That case, therefore, turned on its own facts in an altogether different context and we, do not understand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire amount of Rs. 52,34,829 was the expenditure incurred by the assessee on advertisement and publicity. The sale bills issued by the assessee do not have a separate column regarding the recovery of sales promotion expenses from the sub-dealers or the mobile dealers. The assessee has employed a clear and conscious device by super-imposing the stamp to give an impression as if the sales promotion expenses were received separately. This was done only to defeat and circumvent the provisions of section 37(3A) of the Act. The amount of Rs. 44,07,364, in our view, is part of the sale proceeds of the assessee firm, and even if it is received on account of sales promotion expenses, it is a trading receipt of the assessee in view of the ratio laid down by the Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542. There is no evidence on record that the sub-dealers or the mobile dealers had incurred the expenditure of Rs. 44,07,364 towards sales promotion expenses in their own right. The incurring of the expenditure on this account was by the assessee only. 16. In the Paper Book, the assessee has filed copies of the price lists issued by Godfrey Philips ..... X X X X Extracts X X X X X X X X Extracts X X X X
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