Souvenir ad spend deductible under s.37; guest house depreciation allowed as s.37(4) cannot override other provisions

HC held that expenditure on advertisement in souvenirs is deductible under s.37, relying on CBDT Circular No. 200, which equates such expenses with other business advertisements and is binding on the tax authorities under s.119. The Revenue's contention that the souvenir advertisements did not serve business purpose was rejected in view of the circular. On depreciation, HC held that s.37(4), being a non obstante clause only vis-à-vis s.37(1) and (3), cannot override or restrict allowances otherwise admissible under other provisions, including depreciation. Accordingly, the assessee was held entitled to depreciation on the property used as a guest house, and both issues were decided in its favour.

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Issues involved:
1. Computation of capital for deduction u/s 80J of the Income-tax Act, 1961
2. Disallowance of expenses incurred for advertisement in souvenirs
3. Disallowance of depreciation on a property

Computation of capital for deduction u/s 80J:
The High Court of Bombay, in a reference related to the assessment year 1972-73, addressed the question of whether the assessee could include loans from banks and unsecured borrowings in the computation of capital for deduction u/s 80J. The court, considering the decision in Lohia Machines Ltd. v. Union of India, ruled in favor of the Revenue, answering the question in the negative.

Disallowance of expenses for advertisement in souvenirs:
The court allowed the assessee to raise additional questions, one of which pertained to the disallowance of a sum for advertisement expenses in souvenirs. Referring to a circular by the Central Board of Direct Taxes, the court noted that no distinction should be made between different types of advertisements. As the circular is binding on Income-tax authorities u/s 119 of the Income-tax Act, the court answered this additional question in favor of the assessee.

Disallowance of depreciation on a property:
Regarding the claim for depreciation on a property, the court considered a previous judgment and concluded that if an expenditure or allowance was allowable under other sections of the Income-tax Act, it could not be denied based on prohibitory provisions in another section. Therefore, the court held that the assessee was entitled to depreciation on the property, answering the second additional question in favor of the assessee.

No costs were awarded in this judgment.

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