9911796707
TMI Blog1982 (10) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... vertisement, publicity and sales promotion expenses exceeds Rs. 40,000 a portion of the expenditure determined according to the scale laid down in that section shall not be allowed as a deduction. The ITO, when he made the assessment, did not examine the applicability of this provision and the entire expenditure claimed was thus allowed. As the assessment appeared to be erroneous in that it is was prejudicial to the interest of revenue, a notice u/s 263 was issued to the assessee calling upon him to state his objections, if any, to the assessment being set aside. It was after overruling the objection of the assessee that chit gifts expenditure did not amount to advertisement expenditure nor publicity expenditure or sales promotion expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second member for second draw on payment of Rs. 100 in the aggregate (2 instalments) and third member on payment of Rs. 150 (three instalments) and so on, for fifteen draws. The balance 105 (one hundred and five) members will get jewellery or silver articles on the 16th month. They will not be entitled to refund of the money paid. They have to purchase the articles. The defaulting members will not be included in the draw. Cash also will not be refunded to them. But they will be entitled to take articles for the paid up value of their chits on the 16th month after deducting one months subscription towards cost of gifts and initial expenses. That necessity or obligation to purchase is the main reason why the scheme presents a superficial appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us also filed a chart as follows: Rs. Net profit as per P L account 53,786.59 Add: Chit gift expenses 1,62,390.52 Chit Expenses 1,51,115.00 3,67,192.11 Revised net profit rate 3,67,192.11 Total turn over 76,43,281.20 Net profit rate 4.8% Estimated sales to chit Subscribers 20,00,000,00 Net profit attributable so sales at the average net profit rate 9,60,000,00 Less: Chit gift expenses 1,62,390.52 Chit expenses 1,51,115.00 3,13,505.52 Net Loss on sales to chit subscribers 2,17,505.52 6. The assessee in a letter to the Commr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of 120 take place only after the expiry of fifteen months from the date of operation of the scheme. such a scheme to promote a sale after such a long period cannot be said to be a scale promotion scheme particularly when there is every possibility for the scheme being reasonably interpreted as the scheme with another object. (2) The vast majority of purchasers say 106 out of 120 pays full market value of Rs. 750 before they purchase the articles. It is not as if an article is purchased and the purchaser is given instalment facilities. To pay full amount in advance and purchase an article is not sales promotion. No particular or major benefit accrues to the customer against the receipt of a small silver article. For that he has to pay e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip and design that attracts purchasers. They do not know what is the type of article that can be purchased after 16 months except knowing that it would be article made of gold or silver. Sales promotion scheme is generally about articles which are already manufactured and readily available for sale, or which would be manufactured at a later time according to certain and specified design made known at the time of the release of the sales promotion scheme. A scheme by which a man is to purchase an article of unknown and workmanship 16 months later cannot be construed in commercial parlance or in trading circles as sales promotion scheme. (5) The sale involved in this scheme is only because the assessee had made use of his stock-in-trade to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
