TaxTMI 
TaxTMI 
2016 (10) TMI 402
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.... our opinion in respect of Assessment Year 198485, 1985-86 and 198687 on the following substantial questions of law : (i) Whether in the facts and circumstances of the case and in law, the Tribunal was justified in holding that the expenditure of Rs. 13,97,962/( Rs. 16,25,038 for A.Y. 1985-86) on the free distribution of exercise note books was in the nature of advertisement, publicity and sales promotion within the meaning of subsection (3A) read with subsection (3B) of section 37 of the Act, particularly in view of the contention of the assessee, that free distribution of exercise note books was by way of discount and not by way of advertisement? (ii) Whether in the facts and circumstances of the case and in law, the Tri....
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....n the affirmative i.e. in favour of the respondent Revenue and against the applicant assessee. 4. Regarding question (ii) : (a) This issue arises for Assessment Years 198485 and 1985-86. The facts are identical except the amounts involved. For the present purposes, we take figures of A.Y. 198485, though our answer to the question would apply to both the Assessment Years. (b) The applicant assessee had entered into an agreement with its distributors under which it was agreed that besides bearing expenditure on transportation, octroi, loading / unloading charges, it would also be responsible for advertisement and sales promotion. The agreement also provided that the advertisement / sales promotion expenditure which is incurred would ....
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....n 37 of the Act cannot be invoked. For both the submissions reliance is placed upon the decision of the Gujarat High Court in Commissioner of Income Tax Vs. Vadilal Industries Ltd. 217 CTR (GJ) 318. (f) We find that the Gujarat High Court in Vadilal Industries Ltd. (supra) has held that only the net amount of expenditure on advertisement / sales promotion i.e. gross expenditure less amount recovered by the applicant / assessee from its dealer can be considered for disallowance under Section 37(3A) of the Act. It also observed that where no claim for expenditure under Section 37 of the Act is made then no disallowance under subSection (3A) of Section 37 of the Act can be made. (g) The relevant observations of the Gujarat High Court in ....
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....s not possible to accept the contention of the Revenue that the gross amount is an amount of expenditure incurred. If there is no expenditure, there could be no question of making any claim for deduction. In absence of any claim there can be no question, whether the amount is allowable or otherwise. In other words, there cannot be any disallowance of an amount which is not claimed as a deduction. The Tribunal has recorded a finding that the assessee has claimed an expenditure of Rs. 46,473 only; that would be the only amount which would come up for consideration as being allowable or otherwise under S.37(1) of the Act. The scheme of the Act itself envisages that only after amount is determined under S.37(1) of the Act as being allowable and....