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TMI Blog2001 (7) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... e brief facts, as could be made out from the statement of the case and other material on record are that for the assessment year 1984-85, the assessee, which is a precision tools manufacturing company limited, filed a return of its income and in respect of certain items of expenditure, claimed as deductible expenditure under section 37 of the Act, had also indicated that some amounts in the said expenditure, did attract the pro visions of section 37(3A) of the Act and accordingly had disallowed 20 per cent. of such items of expenditure which attracted the provisions of section 37(3A) of the Act. The Assessing Officer completed the assessment as per the assessment order dated August 29, 1986, and annexure III to the assessment order indicates the items of expenditure in respect of which the provisions of section 37(3A) of the Act were attracted and accordingly 20 per cent. of such expenditure had been disallowed for claiming deduction under section 37 of the Act. The Commissioner of Income-tax, on a perusal of the assessment order, was of the view that a few more items of expenditure in respect of which the assessee had claimed deduction under section 37 also attracted the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Sri G. Sarangan, learned senior counsel appearing on behalf of the assessee, has vehemently tried to impress us that the "expenditure" incurred by the assessee in connection with the holding of conferences/seminars wherein the dealers and distributors of the assessee-company participated and who are educated about the products of the assessee-company, particularly, about their latest technical advancement, technical superiority and for making the dealers familiar with the manner of operation and application of the products of the assessee-company, did not amount to either an activity in the nature of advertising the product of the company to the general public or an activity meant for promoting the sale of the products of the assessee-company. In this regard learned counsel submitted that the seminars/conferences are exclusively for the dealers and distributors of the company and not meant for publicising the products of the assessee-company. It is the submission of learned counsel that holding of the seminar was not largely intended for making the product of the company popular among the general public and for promoting the sales by such popularisation of the products of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not further the sales products of the company, nevertheless, retaining the existing clientele and the assessee's share in the particular product sold in the market, does amount to an activity both in the nature of advertising the product of the assessee and maintaining the sales level of the products. Learned counsel for the Revenue has placed reliance on the Division Bench decision of this court in Smith Kline and French (India) Ltd. v. CIT [1992] 193 ITR 582, which has been affirmed by the Supreme Court in Eshayef v. CIT [2000] 245 ITR 116. We shall examine the question of answering the reference in the light of the rival submissions made by learned counsel and in the context of the judicial opinion that has evolved in the cases decided till now. In CIT v. A. P. Small Scale Industries. Development Corporation [2000] 242 ITR 576, a Division Bench of the Andhra Pradesh High Court was of the view that expenses incurred by an assessee towards printing of brochures and information material with the object of promoting industrial development in the State of Andhra Pradesh, did not amount to an expenditure in the nature of an advertisement expenditure attracting the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kline and French (India) Ltd.'s case [1992] 193 ITR 582, a Division Bench of this court was of the view that the expenditure incurred towards distribution of free samples of medicines not confined to the introductory stage of new medicine, but prolonged over a period of time, was an "expenditure" meant more to promote the product and amounting to an "expenditure" in the nature of an advertisement and sales promotion. This view of the High Court was affirmed by the Supreme Court in Eskayef v. CIT [20001 245 ITR 116. In Dolphin Laboratories' case [2000] 249 ITR 538, a Division Bench of the Calcutta High Court, in consonance with the earlier judicial opinion, on the scope of operation of section 37(3A) of the Act and maintaining the distinction between "expenditure incurred in connection with distribution of medicines by way of free samples" and "advertising expenses incurred in connection with distribution of literature providing for technical data and results of research activity", held that the latter type of expenses cannot be included for disallowance under section 37(3A) of the Act. Learned counsel for the assessee has placed emphasis on this decision of the Division Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that in respect of an item of expenditure which is otherwise allowable as a deductible expenditure, certain restriction was sought to be imposed by restricting the deduction up to 80 per cent. of the actual expenditure claimed. The very fact that it is a deductible expenditure under section 37 of the Act indicates that the "expenditure" is an expenditure incidental and necessarily for the carrying on of the activity of the assessee. If so, if the expenditure is of such activity which can come within the meaning of the specified activities under section 37(3A) read with section 37(3B) of the Act (as it stood at the relevant point of time), it is obvious that the courts will have to give effect to these provisions and cannot relieve the rigour of the provisions of section 37(3A) of the Act by a process of interpretation. If courts should have recourse to such process of interpretations in such situations, it virtually amounts to frustrating the provisions of section 37(3A) of the Act. In the present case, there are two items of expenditure(1) expenditure incurred for holding of seminars, and (2) expenditure incurred on hotel payments. In so far as the second item is concerned ..... 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