2000 (1) TMI 23

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.... promotion' within the meaning of section 37(3A) and (3B) of the Income-tax Act, 1961 ?" The assessee is a manufacturer of medicines. The relevant assessment year is 1985-86. During the course of assessment, the Assessing Officer, inter alia, found the assessee claimed Rs. 2,45,780 as expenses on medical literature and journals and also distributed free samples of medicines to doctors and physicians to the tune of Rs. 10,88,920. The Assessing Officer has treated these expenses for advertisement and sales promotion and disallowed 20 per cent. of the expenditure under sub-sections (3A) and (3B) of section 37 of the Act. In appeal the Commissioner of Income-tax (Appeals) has allowed the total expenditure on samples but he sustained the order ....

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....s promotion. Sub-sections (3A) and (3B) of section 37 were initially introduced by the Finance Act, 1978, with an object to place a curb on extravagant and socially wasteful expenditure that was omitted after two years and again these provisions were introduced by the Finance Act, 1983. While these provisions were introduced in 1983, the Hon'ble Finance Minister in his speech addressed in the House reads as under : "Hon'ble Members must be aware of lavish and wasteful expenditure by trade and industry, particularly on travelling, advertisement and the like. With a view to inculcating a climate of austerity and providing a disincentive to unproductive, avoidable and ostentatious spending by trade and industry, I propose to provide that 20 ....