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TMI Blog1999 (12) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... from the cost of the assets for the purpose of allowing depreciation ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the decision of the Commissioner of Income-tax (Appeals) deleting the commission and brokerage paid by the assessee to the indentors from the purview of disallowance envisaged under section 37(3A) of the Income-tax Act ? The facts of the case are that the assessee is a limited company and was in receipt of ₹ 1,75,900 being Central and State subsidies. While framing the assessment order, the Assessing Officer considered a sum of ₹ 38,619 as the assessee s income under section 41(1) and deducted the balance amount of ₹ 1,37,281 from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows (headnote) : Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the actual cost . The expression actual cost in section 43(1) of the Income-tax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from actual cost . The amount of subsidy is not to be deducted from the actual cost under section 43(1) for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even called for. The Madhya Pradesh High Court in CIT v. Mohd. Ishaque Gulam [1998] 232 ITR 869, considered that the brokerage and commission paid for selling goods would not come within the mischief of the phrase advertisement, publicity and sales promotion as employed in section 37(3A). The expenditure contemplated under section 37(3B) which is to be disallowed under section 37(3A) for advertisement, publicity and sales promotion normally refers to expenditure which is incurred before the sale, so that sales may be increased. If the expenditure is incurred at the time of effecting sales or in connection therewith, then it is purely a selling expenditure. The commission which has been paid to the agents was for the service rendered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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