TaxTMI 
TaxTMI 
TaxTMI 
1984 (6) TMI 134
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....am and Vijayawada. Under section 37(1) only the expenditure wholly and exclusively laid out for the purposes of the business could be allowed to be deducted and expenditure of a personal nature has to be disallowed. Hence, this sum of Rs. 3,169 was disallowed. The balance of Rs. 1,72,753 was required to be considered for deduction. However, section 37(3) states that notwithstanding anything contained in section 37(1), any expenditure on advertisement shall be allowed only to the extent and subject to such conditions, if any, that may be prescribed. Rule 6B of the Income-tax Rules, 1962 ('the Rules') prescribes that the allowance in respect of the expenditure on advertisement shall not exceed in respect of articles intended for presentation,....
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....sum of Rs. 1,72,753 equivalent to Rs. 21,594 was disallowed under section 37(3A). Similarly, for the assessment year 1980-81, following the same process, a sum of Rs. 47,000 was disallowed out of the adjusted expenditure of Rs. 3,13,336. This was upheld by the Commissioner (Appeals). 3. In these appeals, the contention of the assessee is that for the assessment year 1979-80, the sum of Rs. 1,21,264 which was not disallowed under section 37(3) read with rule 6B should also be excluded from the adjusted expenditure so that the balance of Rs. 51,489 alone could be treated as adjusted expenditure. We are unable to see how this result could be achieved in the face of the self-evident provision of the definition of 'adjusted expenditure'. It onl....
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....f the provisions of section 37. Section 37 originally contained sub-section (1) providing for the allowance of all expenditure laid out for the purpose of the business except what was either capital in nature or was personal expenditure. Parliament then introduced sub-section (2) which provided that even the expenditure could be allowed under sub-section (1) subject to a ceiling with respect to entertainment expenditure. Again sub-section (3) was introduced to state that expenditure incurred by the assessee on advertisement or guest house or travelling would be subject to certain conditions and limits prescribed. Thereafter, sub-section (3A) was introduced to provide an overall ceiling in respect of aggregate expenditure on advertisement, p....
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....dividual item of expenditure under sub-section (3) with respect to the conditions prescribed. 6. Two illustrations would suffice to illustrate the two sides of the coin and demonstrate the fallacy in the argument of the assessee. By the simultaneous operation of these two sub-sections, while there would be no disallowance under sub-section (3A), if the expenditure does not exceed Rs. 40,000, there would yet be a disallowance under sub-section (3) if that amount of Rs. 40,000 has been spent on presentation of articles exceeding Rs. 50, thus, violating the prescribed rule under rule 6B. In contrast even if the entire expenditure of the assessee on advertisement is within that rule and could not be disallowed under sub-section (3), yet the ov....