1999 (11) TMI 18

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....on the question which reads as under. "Whether, the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 1,57,149 made under section 37(3A) in respect of the expenditure incurred on literature distributed to doctors?" Mr. Nayak, learned counsel appearing for the Revenue, submitted that the expenditure for printing of calendars and literature ought not to have been allowed. He was of the view that the Assessing Officer on reading the explanation has rightly come to the conclusion that the amount spent for literature is not permissible. He called for the files from the Assessing Officer. The assessee vide its reply dated January 22, 1992, in p....

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.... reply. The Commissioner of Income-tax (Appeals) as well as the Tribunal were of the view, that the literature which contains basic information about the contents of the products/medicine, its side-effects, etc., clinical pharmacology, indications and contra-indications and medical references which are meant for the limited use of the medical practitioners and the laboratories and the same cannot be said to be an advertisement. Hence, the case of the assessee cannot be said to be covered by the mischief of section 37(3A). The amount spent whether should be considered as revenue expenditure or not, one must bear in mind that merely because informative literature in attractive print is in the circulation for the doctors, nurses or the laborat....

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....of informative and explanatory literature to the doctors, nurses, hospitals and laboratories is essential for running of the business and bare minimum to carry on trade. The Tribunal relied on the decision of the Andhra Pradesh High Court in the case of CIT v. J and J Dechane Laboratories (P.) Ltd. [1996] 222 ITR 11 which has considered the aforesaid decisions and held that the appellate authority as well as the Tribunal were right in directing the exclusion of the expenditure on free samples supplied to the doctors in working out the disallowance under section 37(3A) of the Act. The court in CIT v. J and J Dechane Laboratories (P.) Ltd. [1996] 222 ITR 11 (AP) distinguished on the facts the decision of the Karnataka High Court in Smith Kli....