TaxTMI 
TaxTMI 
2002 (11) TMI 26
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....sessment year with which we are concerned is 1984-85 and as far as the first question of law referred to us is concerned, it is fairly submitted by learned counsel for the Revenue that the issue raised in the first question is covered against the Revenue by a decision of the Supreme Court in the case of CIT v. Shaan Finance P. Ltd. [1998] 231 ITR 308. Following the decision of the Supreme Court in CIT v. Shaan Finance P. Ltd. [1998] 231 ITR 308, the first question of law is answered in the affirmative, against the Revenue and in favour of the assessee. The second question deals with the allowability of the expenditure incurred by the assessee on advertisements inviting fixed deposits from the public. The assessee claimed a total sum of Rs. 2,93,340 as advertisement expenditure for collecting fixed deposits. The Income-tax Officer applied the provisions of sub-section (3A) of section 37 of the Income-tax Act, 1961, and disallowed a portion of the expenditure as provided in the section on the ground that the expenditure was incurred towards advertisements and towards sales promotion expenditure and, hence, disallowance has to be made under section 37(3A) of the Income-tax Act. The....
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....refore submitted that the view taken by the Appellate Tribunal is not correct and not in consonance with the decision of the Supreme Court. Mr. J. Narayanaswamy, learned counsel for the assessee, on the other hand, submitted that the assessee had incurred expenditure on advertisements in compliance with the provisions of section 58A of the Companies Act, 1956, and the amount spent on advertisements is allowable as business expenditure. He submitted that the Central Board of Direct Taxes has issued the Circular No. 240, dated May 17, 1978, explaining that the provision of section 37(3A) of the Income-tax Act would not apply in relation to an expenditure incurred for publication in any newspaper of any notice required to be published by or under any law. He therefore submitted that the Appellate Tribunal was correct in holding that the amount of expenditure does not qualify for disallowance under section 37(3A) of the Income-tax Act. We carefully considered the submissions of learned counsel for the Revenue and learned counsel for the assessee. Section 37 of the Act provides that any expenditure incurred, laid out or expended wholly and exclusively for the purpose of the busine....
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....n other words, it is not open to the company to invite deposits in any other form. The statutory form prescribed is fairly a lengthy one under the Companies (Acceptance of Deposits) Rules, 1975, and it requires that the advertisement shall be made in a leading English newspaper and in one vernacular newspaper circulating in the State in which the registered office of the company is situate. The text of the advertisement shall contain the information regarding the name of the company, the date of incorporation of the company, the business carried on by the company and its subsidiaries, brief particulars of the management of the company, names, addresses and occupations of the directors, the profits of the company before and after making provision for tax for the three financial years immediately preceding the date of advertisement, the dividends declared by the company in respect of the said years and a summarised financial position of the company as in the two audited balance sheets immediately preceding the date of advertisement in the form prescribed in the rules. We are therefore of the view that in view of the statutory provision contained in section 58A of the Companies Act, t....
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....te to popularise the co-operative movement by effecting an advertisement and the co-operative society in question incurred certain expenditure towards propaganda and the question arose whether the expenditure incurred by the assessee for propaganda would constitute advertisement on sales promotion within the meaning of section 37(3A) read with section 37(3B) of the Income-tax Act. The Madhya Pradesh High Court held that the directives of the State Government to cooperative societies were statutory in nature and in compliance with the directives, the expenditure was incurred by the assessee and hence, the expenditure would constitute a business expenditure and the expenditure was not subject to the limitation of allow ability prescribed in section 37(3A) of the Income-tax Act. We are in respectful agreement with the view expressed by the Madhya Pradesh High Court in M. P. State Handloom Weavers' Co-operative Society's case [1998] 233 ITR 62. The assessee had incurred the expenditure on advertisements for collecting fixed deposits and the advertisements were statutory advertisements and therefore the provisions of section 37(3A) read with section 37(3B) of the Income-tax Act do not a....