1999 (11) TMI 2 - HC - Income Tax

Commission on Sales Not Sales Promotion Expenditure: High Court Decision Upheld

The High Court of Karnataka held that commission paid on sales is not classified as sales promotion expenditure, thus section 37(3A) does not apply. The ... Business Expenditure, Disallowance, Commission Payment On Sales - 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that commission paid on sales is not sales promotion expenditure, and, therefore, the provisions of section 37(3A) have no application?' - The matter is now covered by the decision given in the case of CIT v. Srinivasa Textile Processing Ltd. wherein it was observed that 'sales promotion' would have the meaning of 'advertisement, publicity, i.e., by providing certain incentive or taking certain other steps by which the product of the manufacturer could be popularised to promote the sale and would include the amount paid to the commission agent.' In view of the above, we are of the view that the Tribunal is right in law in holding that commission paid on sales is not sales promotion expenditure, and, therefore, the provisions Of Section 37(3A) have no application. The High Court of Karnataka ruled that commission paid on sales is not considered as sales promotion expenditure, and therefore, the provisions of section 37(3A) do not apply. The Tribunal's decision was upheld based on previous case law. The judgment favored the assessee and went against the Revenue.