9911796707
TMI Blog1990 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... asking the assessee-company to explain as to why assessment made should not be revised as the same was erroneous in so far as it was prejudicial to the interests of the revenue. 3. The assessee in its detailed reply dated 25-2-88 objected to the revision of assessment. It was explained that the sum of Rs. 1,57,65,878 was paid to the selling agents on sale of publication. The Newspaper was sold almost entirely through selling agents outside the publishing centres of Calcutta and New Delhi and through hawkers in Calcutta and Delhi. The selling agents outside Calcutta and Delhi have to make arrangment for expedient and efficient distribution of Newspaper through hawkers. The commission is paid at a uniform rate to all selling agents to compensate them for services of distribution and hawking. The selling agents apart from above service of distribution are required to pay for the Newspapers supplied to them during a month within 25 days of the following month irrespective of whether or not they have been able to collect relevant amounts from their clients or hawkers. The Newspaper thus saved the expenditure of maintaining a debt collection cell for recovering debts from individual r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to its agents for procuring orders for its products would not fall within the true meaning of the words ' sales promotion '. The assessee thus emphasized that provisions of section 37(3A) were not applicable. 6. The Commissioner considered the above contention of the assessee but found the same to be unacceptable. He directed as below : " In the absence of a statutory definition of the tetm ' sales promotion ' any expenditure for effecting sales, such as, a sales organisation, commission paid to sales man, commission paid to sales agent and whatever expenses which were in connection with sales would constitute expenditure on sales promotion. The Act has specifically laid down that expenditure on advertisement, publicity and sales promotion shall not include remuneration paid to employees of the assessee engaged in one or more of the said activities. On other words, in view of the fact that the law itself lays down what is to be excluded all the expenses other than those mentioned above have to be treated as constituted expenditure on advertisement, publicity and sales promotion. The action of the assessing officer in not disallowing 20% of the expenditure on commission p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer allowed the claim without considering the provisions of section 37(3A) of the Act. 10. We have carefully considered the rival submissions, facts and circumstances of case and material on record. The departmental representative's objection that the Assessing Officer did not examine the case in the light of provision of section 37(3A) is factually incorrect. There is specific reference to the above provision as pointed out by Shri Levi. We also agree with Shri Levi that in view of order of the Commissioner and notice under section 263 of the Act, and in the circumstances of the case, the revenue is not entitled to raise the above objection. The Commissioner passed the order on merit and, therefore, we are to consider whether his conclusion with reference to section 37(3A) is justified. 11. The sub-section (3A) and (3B) of section 37 were first introduced in 1978. In the changed form these were introduced by the Finance Act, 1983 with effect from 1-4-1984 and omitted by the Finance Act, 1985 with effect from 1-4-1986. At the relevant time the said provisions were as under :---- " (3A) Notwithstanding anything contained in sub-section (1), where the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoided. 13. If words " Sales promotion " are taken to cover any " expenditure connected with sale, then the provision would be applicable to almost all expenses incurred by a trader. Such a view, prima facie, appears to be unreasonable. Such a construction strikes at the very root of freedom to carry on sale and thus indirectly clogs and prohibits the carrying on of business effectively. It is difficult to imagine how " sales " can be made without incurring any expenditure connected with them. Such a view would also be open to challenge as ultra vires of the power of the Legislature. But settled rules of construction require that words in enactment should be given a reasonable meaning to keep the matter within the legislative competence. We, therefore, find it difficult to accept the meaning given to the words 'sales promotion' by the Commissioner. 14. The provisions of sub-sections (3A) and (3B) were not in the Income-tax Act, 1961 at the time of commencement; but were introduced subsequently. These were first introduced through section 8 of the Finance Act, 1978. In order to appreciate the context and setting of the provision, it is necessary to look at the mischief which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or presuming that even the Board took a mistaken view of the provision. In our view, rule of construction nescuntur a sociis is applicable here. The abovesaid maximum which is much broader than the maximum ejusdem generis is explained by LORD MACMILLAN to mean : " The meaning of a word is to be judged by the company it keeps ". Therefore, the words " sales promotion " must take colour from associated words " advertisement " and " publicity ". 17. In view of above discussion and background, we are unable to hold that the Commissioner paid to sales agents or advertisment agents can be disallowed under section 37(3A) of the Act. It is not possible to pick up and isolate words " sales promotion " out of expression " advertisement, publicity and sales promotion " and give it literal meaning and disallow under section 37(3A) every expenditure aimed at promoting sales. The intended object that only socially wasteful expenditure falling within total expression " advertisement, publicity and sales promotion " are to be disallowed has to be kept in view while applying section 37(3A) of the Act. It is well known that Newspapers are sold through hawkers and sale agents. In fact, sale agents ..... X X X X Extracts X X X X X X X X Extracts X X X X
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