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TMI Blog1991 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961, and rule 6B of the Income-tax Rules, prescribe conditions as to the extent to which the expenditure on advertisements shall be allowed while computing the income chargeable under the head "Profits and gains of business or profession". With effect from April 1, 1979, subsections (3A), (3B), (3C) and (3D) were introduced in section 37 of the Act and they provided for disallowance of part of the expenditure on advertisements. However, with effect from April 1, 1981, those sub- sections were withdrawn. Again, with effect from April 1, 1984, the very same subsections have been introduced in a modified manner. Since the validity of these sub-sections is challenged in this writ petition, it would be convenient to extract those sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fixation of Rs. 1 lakh in sub-section (3A) is arbitrary and has no nexus to the objects sought to be achieved by the Act. The Government had not kept in mind the distinction between the assessees who manufacture several products some of which require advertisements and some do not on the one hand and between the assessees who manufacture products which either require advertisement or do not require advertisement at all. In respect of his arguments, Mr. T. Srinivasamoorthy relies on British Electrical and Pumps (P.) Ltd. v. CIT [1977] 106 ITR 620 (Cal). On going through the said decision, I am afraid that the same does not advance the case of the petitioner. In that case, the Tribunal had disallowed the claim of the assessee, under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct which is being advertised, is proof of the fact that a reasonable classification had been adopted. I am also in agreement with the arguments of learned counsel for the respondents that Parliament has not banned advertisement as such nor has Parliament put a ceiling on expenditure. What the sub-section stipulates is that any expenditure over and above the limit prescribed would not qualify for deduction for the purpose of computing the income. Learned counsel for the respondents has also cited the following decisions in opposition to the claim of the petitioner. In Mysore KirlosKar Ltd. v. Union of India [1986] 160 ITR 50, the Karnataka High Court had occasion to test the validity of the very same sub-section (3A) of section 37 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this court on the matter have permitted the Legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes." In Hoechst Pharmaceutical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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