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TMI Blog1993 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... new tooth paste called "Promise". It is the claim of the petitioners that the tooth paste earned high acclaim and won many awards on account of quality and price. From the year 1980, the business of the partnership-firm was taken over by the company. The petitioners' claim that from the year 1981, sales of the tooth paste have gone up dramatically and the company exports large quantities abroad and the earnings of the company run into crores of rupees. The company spends large amounts on advertisement, publicity and sales promotion to compete with the tooth pastes marketed by multinational manufacturers. The sale of tooth paste climbed from Rs. 557 lakhs in the year 1981 to Rs. 1,077 lakhs in the year 1983. The expenses on advertisements, promotion, etc., in respect of the sale of tooth paste also jumped from Rs. 116 lakhs in the year 1981 to Rs. 138 lakhs in the year 1983. For the year ending June 30, 1983, the company incurred expenditure on advertisement, publicity and sales promotion totalling Rs. 197 lakhs and out of this amount Rs. 138 lakhs were spent on advertisement in newspapers, films, television and radio. The petitioners' claim that expenditure incurred on advertise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance of aircraft and motor cars shall include,- (i) expenditure incurred on chartering any aircraft and expenditure on hire charges for engaging cars plied for hire; (ii) conveyance allowance paid to employees and, where the assessee is a company, conveyance allowance paid to its directors also. (3C) Nothing contained in sub-section (3A) shall apply in respect of expenditure incurred by an assessee, being a domestic company as defined in clause (2) of section 80B, or a person (other than a company) who is resident in India in respect of expenditure incurred wholly and exclusively on- (i) advertisement, publicity and sales promotion outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business; (ii) running and maintenance of motor cars in any branch, office or agency maintained outside India, for the promotion of the sale outside India of such goods, services or facilities. (3D) No disallowance under sub-section (3A) shall be made- (i) in the case of an assessee engaged in the business of operation of aircraft, in respect of expenditure incurred on running and maintenance of such aircraft ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that freedom of speech and expression includes the right of a businessman to advertise, publicise and promote sales of his products and which is popularly referred to as "commercial speech". It was urged that the impugned amendments constitute an unreasonable restriction on the petitioners' right of freedom of commercial speech and the direct and inevitable effect of the amendments is to curtail or restrict the petitioners' fundamental rights. Shri Chinoy submitted that commercial speech results in the education of the citizens of this country endowing them with sufficient choice in their consumption pattern, and the amendment seeks to limit the circulation of information to which citizens are entitled by virtue of the constitutional guarantee. It was further contended that the main source of income for the newspapers is from advertisement and the direct and inevitable effect of the impugned amendments would be to reduce the advertisements and, thereby, to curtail the circulation of the newspapers, which would directly affect the freedom of the press. Shri Jetly, learned counsel appearing on behalf of the Department, on the other hand, contended that the challenge to the amended pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of carrying out the amendment is not to levy tax but to prevent non-productive, avoidable and ostentatious spending by the trade. It was suggested that from the speech of the Finance Minister, an inference is inevitable that the amendments were introduced with a view to curtail or restrain commercial speech. Learned counsel placed strong reliance upon the decisions of the Supreme Court in Indian Express Newspapers (Bombay) P. Ltd. v. Union of India [1986] 159 ITR 856 ; Sakal Papers (P.) Ltd. v. Union of India, AIR 1962 SC 305 and Hamdard Dawakhana v. Union of India, AIR 1960 SC 554, in support of the submission. Before adverting to the decisions relied upon and to determine whether the amended provisions directly put a restraint upon commercial speech or the freedom of speech and expression on businessmen to advertise, it is necessary to refer to the exact ambit of the amended provisions under challenge. Section 37 of the Income-tax Act provides that any expenditure not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in Hamdard Dawakhana v. Union of India, AIR 1960 SC 554 indicated that commercial advertising would not fall within the expression "speech and expression" under article 19(1)(a) of the Constitution of India but the subsequent decisions in Sakal Papers (P.) Ltd. v. Union of India, AIR 1962 SC 305 and Indian Express Newspapers (Bombay) Private Ltd. v. Union of India, [1986] 159 ITR 856 (SC) clearly establish that commercial speech can also come within the ambit of article 19(1)(a) of the Constitution of India. At this stage, it would be convenient to make a reference to the decisions cited by Shri Chinoy in support of the submission. In the case of State of Bombay v. F. N. Balsara [1951] SCR 682 ; AIR 1951 SC 318, the Supreme Court examined the expression "commending" in section 23(a) and section 24(1)(a) of the Bombay Prohibition Act to determine whether the expression "commending" intoxicant are said to conflict with the fundamental right guaranteed by article 19(1)(a) of the Constitution of India. The Supreme Court observed that there can be no doubt that the prohibition against "commending" intoxicant is a curtailment of the right guaranteed and it can be supported o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in a newspaper. Mr. Justice Mudholkar, speaking for the Bench, observed : "It may well be within the power of the State to place, in the interest of the general public, restrictions upon the right of a citizen to carry on business but it is not open to the State to achieve this object by directly and immediately curtailing any other freedom of that citizen guaranteed by the Constitution and which is not susceptible of abridgement on the same grounds as are set out in clause (6) of article 19. Therefore, the right of freedom of speech cannot be taken away with the object of placing restrictions on the business activities of a citizen. Freedom of speech can be restricted only in the interests of the security of the State, friendly relations with foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence. It cannot, like the freedom to carry on business, be curtailed in the interest of the general public. If a law directly affecting it is challenged, it is no answer that the restrictions enacted by it are justifiable under clauses (3) to (6). For the scheme of article 19 is to enumerate different freedoms separatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave immunity from taxation ?" After exhaustive consideration of the subject, the Supreme Court held that newspapers cannot claim immunity from taxation. As to whether the tax levied on the newspaper industry transgresses into the field of freedom of expression and stifles that freedom, the Supreme Court observed : "As long as it is within reasonable limits and does not impede freedom of expression, it will not be contravening the limitations of article 19(2). The delicate task of determining when it crosses from the area of profession, occupation, trade, business or industry into the area of freedom of expression and interferes with that freedom is entrusted to the courts. " The Supreme Court then examined the earlier decisions in Sakal Papers (P.) Ltd.'s case, AIR 1962 SC 305 and Bennett Coleman and Co.'s case, AIR 1973 SC 106, and observed that the impugned provisions have the direct consequence of the curtailment of advertisements. The freedom is violated by placing a restraint upon the integral part of the freedom or by placing a restraint upon something which is the essential part of the freedom. Shri Chinoy referred to the decision of the United States Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a restraint or curtail the right of the advertiser to publish commercial advertisements so as to attract the prohibition contained in article 19(1)(a) of the Constitution of India. In our judgment, it is impossible to accede to the submission that Parliament had found deliberate and calculated device in the guise of the tax to limit the right of advertisers of commercial speech. It is also difficult to accede to the submission that the enactment of sub-sections (3A) and (3B) of section 37 of the Income-tax Act has the direct inevitable consequence of infringing upon the protection guaranteed under article 19(1)(a) of the Constitution of India. As mentioned hereinabove, sub-section (3A) prescribes that when the aggregate expenditure incurred by the assessee exceeds one hundred thousand rupees, then 20 per cent. of such excess shall not be allowed as deduction in computing the income chargeable under the head "Profits and gains of business or profession". It is necessary to bear in mind that there is no restriction whatsoever on the expenses which an assessee can incur on advertisement, publicity and sales promotion or running and maintenance of aircraft and motor cars or payments m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speech, it is not possible to strike down the legislation as having that effect and operation. The reliance by Shri Chinoy on the speech of the Finance Minister at the time of introduction of the Finance Act cannot lead to the conclusion that the fiscal levy seeks to curtail the volume of advertising on the ground that such expenditure is wasteful and unproductive. The speech of the Finance Minister must be read in its proper context and it cannot be overlooked that the provisions of sub-section (3B) of section 37 do not refer merely to expenditure incurred on advertisements but also to the running and maintenance of aircrafts and motor cars and payments made to hotels. The speech of the Finance Minister cannot be limited only to the expenditure incurred on advertisements and, reading it in its proper perspective, it is obvious that the fiscal levy is not a restraint on the speech and expression of the advertiser in publishing the advertisements. While examining the complaint of restraint on advertisements, it is not possible to equate the right to publish advertisements with the freedom of speech guaranteed to newspapers. The complaint of Shri Chinoy that the restriction on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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