Commissioner of Income-tax Vs. A.P.E. India (P.) Ltd. - Court Judgment

Excerpt:
1. this is-a reference application by the cit requiring the tribunal to refer one question of law, which is said to arise from the order of the tribunal disposing of the assessee's appeal for the assessment year 1985-86. the question suggested is given below:- whether, on the facts and in the circumstances of the case, the it at was right in law in holding that the expenditure on commission was not in the nature of expenditure on sales promotion, as defined in section 37(3b), for the purpose of making a disallowance under section 37(3a) of the it act, 1961? in our opinion, the question does not require reference. we give our reasons below.2. the assessee is a private ltd. company deriving income from the sale of electronic models and magnates. the assessee had paid section 2,16,463 to their agents forgetting sales orders. the ito treated this amount as sales promotion expenditure and disallowed a percentage of it under section 37(3a). the tribunal held that the payment of commission is not in the nature of sales promotion expenditure. therefore, the provisions of section 37(3a) will not be applicable.3. the question suggested arises from this finding. an identical question was suggested for reference in the case of om prakash fateh chand ltd. the reference application under section 256(2) was dismissed by the high court in their order in itc no. 116/90 dated 17-12-1990.the order of the high court reads as follows:- the petitioner seeks reference of the following question to this court:- whether, on the facts and in the circumstances of the case, as well as in law the hon'ble tribunal was right in holding that expenditure of rs. 2,15,204 claimed as commission on sales was not in the nature of sales promotion expenses to be considered for the purposes of section 37(3a) of the it act, 1961? the tribunal has held as a question of fact that the expenditure in question cannot be regarded as sales promotion expenses. this is a finding of fact. the question which is referred to in section 37(3a) is the type set out in section 37(3b) which clearly is of the nature of advertisement, publicity and sales promotion etc. the word sales promotion would take colour from the preceding words and in any case the finding of the tribunal in the present case is that the expenses are not in the nature of sales promotion. this is a finding of fact. no question of law arises. dismissed.4. thus, it would be seen that on this issue, section 256(2) itself has been rejected. so we would dismiss the reference application.

Judgment:
1. This is-a Reference Application by the CIT requiring the Tribunal to refer one question of law, which is said to arise from the order of the Tribunal disposing of the assessee's appeal for the assessment year 1985-86. The question suggested is given below:- Whether, on the facts and in the circumstances of the case, the IT AT was right in law in holding that the expenditure on commission was not in the nature of expenditure on sales promotion, as defined in Section 37(3B), for the purpose of making a disallowance under Section 37(3A) of the IT Act, 1961? In our opinion, the question does not require reference. We give our reasons below.

2. The assessee is a Private Ltd. Company deriving income from the sale of electronic Models and Magnates. The assessee had paid Section 2,16,463 to their agents forgetting sales orders. The ITO treated this amount as Sales Promotion Expenditure and disallowed a percentage of it under Section 37(3A). The Tribunal held that the payment of commission is not in the nature of Sales Promotion Expenditure. Therefore, the provisions of Section 37(3A) will not be applicable.

3. The question suggested arises from this finding. An identical question was suggested for reference in the case of Om Prakash Fateh Chand Ltd. The Reference Application under Section 256(2) was dismissed by the High Court in their order in ITC No. 116/90 dated 17-12-1990.

The order of the High Court reads as follows:- The petitioner seeks reference of the following question to this court:- Whether, on the facts and in the circumstances of the case, as well as in law the Hon'ble Tribunal was right in holding that expenditure of Rs. 2,15,204 claimed as commission on sales was not in the nature of sales promotion expenses to be considered for the purposes of Section 37(3A) of the IT Act, 1961? The Tribunal has held as a question of fact that the expenditure in question cannot be regarded as Sales Promotion Expenses. This is a finding of fact. The question which is referred to in Section 37(3A) is the type set out in Section 37(3B) which clearly is of the nature of advertisement, publicity and sales promotion etc. The word sales promotion would take colour from the preceding words and in any case the finding of the Tribunal in the present case is that the expenses are not in the nature of sales promotion. This is a finding of fact.

No question of law arises. Dismissed.

4. Thus, it would be seen that on this issue, Section 256(2) itself has been rejected. So we would dismiss the Reference Application.