1991 (7) TMI 155

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... involve minor issues.] 4. The last point in dispute is with reference to the ceiling of Rs. 1 lakh applied under section 37(2A). That section provides that notwithstanding anything contained in sub-section (1) of section 37 where the expenditure incurred exceeds Rs. 1,00,000, 20% of such excess shall not be allowed as a deduction. The items mentioned are advertisements, maintenance of motor ca....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tious expenditure. A look at the items of expenditure would show that it refers to maintenance of motor cars and payments to hotels apart from advertisement which normally depends upon the period of time to which it relates. Thus the expenditure will fluctuate according to the extent of the accounting period. In this connection we cannot forget the fact that under section 4, income-tax is charged ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....be entitled to such proportionate increase in depreciation. However, what we are now concerned is that of a disallowance under section 37(3A) of expenditure in excess of Rs. 1,00,000 as applicable to the period of 12 months. No doubt, there is nothing in the section or the Rules or even in the order of the Assessing Officer permitting the change of the previous year, providing for modifying the ce....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....bviously related only to the previous year of 12 months. When the accounting period had been extended to 18 months, it stands to reason that the ceiling has to be suitably modified as otherwise it will lead to an unjust result since a greater amount of receipt is brought to tax while a proportionately larger amount of deduction is not allowed. We are, therefore, compelled by our sense of equity an....