1. This is an appeal by the assessee, which is directed against the order of the CIT (A) dated 19-4-1988 wherein he has upheld the order of the IAC (Asst.) Range-I, Madras dated 3-10-1986 giving effect to the directions of the CIT (A) in ITA No. 165/83-84 dated 9-2-1984. On the issue of disallowance under Section 37(3A) for the assessment year 1980-81 and in the absence of break up details for expenditure of Rs. 6,32,200 under the head 'Calendars', the CIT (A) restored the matter to the file of the Assessing Officer with a direction to ascertain the correct amount of expenditure incurred on calendars, which did not involve any advertisement, or publicity, or sales promotion and allow the correct amount of expenditure incurred thereon under Section 37(1) without applying the provisions of Section 37(3A) on such expenditure.
2. While giving effect to such direction of the CIT (A) the IAC (Asst.) by his order dated 3-10-1986 ascertained the break up details of expenses under the head calendars and found that an amount of Rs. 2,92,575 related to expenses incurred on items other than calendar. On the balance amount of Rs. 3,39,625 representing expenditure on calendars 10% of the amount, which was disallowed earlier, was reduced from the total income as per original assessment order.
In other words, the Assessing Officer has not disallowed under Section 37(3A) expenditure on calendars. By inference he sustained the disallowances in respect of the three items of expenditure, such as, southern handicrafts - presentation items Rs. 37,475; cost of printing technical booklets Rs. 2,46,100 and cost of packing etc. relating to technical booklets Rs. 9,000 (estimated), amounting in all to Rs. 2,92,575.
3. On appeal, the CIT (A)-V, Madras, by his order dated 19-4-1988 confirmed the order of the IAC (Asst.) dated 3-10-1986 on the ground that the order giving effect to the direction of the CIT (A) was in accordance with the direction given by the CIT (A). In other words, he held that there was no direction in regard to other items of expenses and the assessee's contention that the IAC (Asst.) should have dealt with other expenses also, was devoid of merit because it fell outside the scope of direction given by the CIT (A).
4. The assessee has taken ground to urge that the CIT (A) ought to have considered the grounds against disallowance under Section 37(3A) in respect of Southern Handicrafts presentations, cost of printing technical booklets and cost of packing in respect of which the assessee could not have taken a ground owing to the mistake of the Assessing Officer in classifying the entire expenditure as relating to calendars.
On merits of each item of expenditure, separate grounds were taken that the expenses could not be disallowed under Section 37(3A). Hence it was prayed that suitable orders might be passed in this appeal.
5. At the time of the hearing, Shri M. Uttama Reddy, the learned counsel for the assessee has been heard and he relied on the decision of the Tribunal, Madras Bench-D in the assessee's own case for the assessment year 1984-85 in ITA No. 1052 (Mad.)/88 dated 14-2-1992. The Tribunal held in paragraph-5 therein that the provisions of Section 37(3A) were not applicable to the expenditure relating to cost of printing technical booklets, packing etc. Similarly, in paragraph-7 of its order it held that the expenses on distribution of dry fruits and ball pens were not advertisement in nature. It thus directed to exclude gift items from the disallowance under Section 37(3A). As regards cost of packing, which is not covered by any decision, it was urged that it is part and parcel of cost of printing technical booklets and, therefore, such expenses were also to be excluded from the purview of Section 37(3A).
6. The learned Departmental Representative has conceded that on merits the issues in this appeal stand covered by the order of the Tribunal cited in favour of the assessee.
7. After due consideration, we are of the opinion that the expenses in respect of Southern Handicrafts presentation items, cost of printing technical booklets and cost of packing are intimately and inextricably connected with the cost of printing technical booklets did not amount to advertisement or publicity or sales promotion. In this connection, the decision of the Tribunal in the assessee's own case for the assessment year 1984-85 in ITA No. 1052 (Mds.)/88 dated 14 2-1992 is specifically applicable in respect of these items of expenses involved.
8. In this view of the matter, therefore, the CIT (A) was not justified in declining to deal with the grounds taken by the assessee in respect of these items on the ground that the direction of his predecessor was specific and has been rightly carried out by the Assessing Officer in the order giving effect to the CIT (A)'s order. It is relevant to point out at this juncture that the predecessor CIT (A) in his order dated 9-2-1984 has dealt with the expenditure relating to calendars alone and the direction was that the Assessing Officer should ascertain the correct amount of expenditure incurred on calendars on which the provisions of Section 37(3A) should not be applied. This would show that the order of the CIT (A) is silent in respect of items of expenses other than calendars. Thus the CIT (A) has not expressed any finding or decision in respect of expenses other than calendars which has been left open by him to be decided by the Assessing Officer. Equally on appeal the Tribunal by its order in ITA No. 1445 (Mds.)/84, dated 5-7-1985 expressed its inability to decide the issue in the absence of break up details of expenses of Rs. 6,32,200 and in that context the Tribunal thought it fit to sustain the direction of the CIT (A). The Tribunal also did not express itself in respect of expenditure other than calendars because the details were not furnished before the Tribunal. Thus the issue had come up for consideration for the first time before the Assessing Officer when he gave effect to the direction of the CIT (A). Adopting a technical and narrow perspective of the directions, the Assessing Officer declined to deal with the claim of the assessee in respect of expenses other than calendars and the CIT (A) has not properly appreciated the issue and he has confirmed the action of the Assessing Officer, which is not just. Admittedly, on merits these three items of expenses stand concluded by the order of the Tribunal in assessee's own case for the assessment year 1984-85.
Even in the direction given by the IAC under Section 144B(4) of the Income-tax Act for the assessment year 1980-81 he has specifically excluded the expenditure incurred on hand outs and booklets vide para-1.2 of his direction dated 2-9-1983. Had the details been furnished before the IAC, the assessee could have obtained relief at his level also. Thus, in view of these facts of the case, we set aside the order of the CIT (A) and direct the Assessing Officer not to apply the provisions of Section 37(2A) on the expenses pertaining to these three items.