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TMI Blog1999 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 37(3D) in respect of the expenditure on advertisement and publicity incurred on its new product 'Thums up' on the ground that the assessee had set up a new industrial undertaking for manufacturing the said new product ?" The respondent-assessee which is a private limited company engaged in the manufacture and sale of soft drinks, had introduced a new product known as Thums up into the market in the month of July, 1978, i.e., during the year previous to the assessment year 1979-80. For the production of this new soft drink, the Tribunal found that the assessee added an additional storage tank, etc., and made substantial investments for that purpose. An amount of Rs. 78,749 was incurred during the relevant assessment year 1980-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking by extending its manufacturing capacity. The correctness of this view has been questioned before us. Learned standing counsel for the Income-tax Department, submits that there is no scope to invoke sub-section (3D) of section 37 in a case where there was merely an augmentation of the production capacity and the finding of the Tribunal that a new industrial undertaking came into being during 1979-80 is without any basis and the conclusion is not legally sustainable. It is pointed out that the decision in Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC) has no application. We may straightaway point out that neither the decision relied upon by the Tribunal nor the ratio of the judgment in Mettur Chemical and Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether the rejection of the application on the ground that the conclusion was based on facts and therefore no question of law arises, is a correct approach. But, it is also our view that in the facts and circumstances of the case, the assessee is legitimately eligible to invoke the benefit of section 37(3D) in so far as the advertisement and sales promotion expenses of the new product "Thums up" are concerned. Keeping in view the objective of the provision and the language employed in the provision---" in the previous year in which such undertaking begins to manufacture or produce such articles", it is reasonable to hold that the production of a new article in connection with which the advertisement and publicity expenses were incurred a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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