Commissioner of Income Tax vs Ampro Food Products

B.P. Jeevan Reddy, J.

(1) The following question are referred for our opinion u/s 256(1) of the Income Tax Act, 1961 (the Act) :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the expenditure of Rs. 1,24,091 incurred for the purpose of distributing free note books and expenditure of Rs. 1,08,565 incurred for placing gift coupons in the assessee''s products, , biscuit tins, in order to promote sales are not covered by section 37(3A) of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal, is right in law in directing that the expenditure of Rs. 2,32,656 on note books and gift coupons should be allowed in full u/s 37(1) of the Income Tax Act, 1961 ?"

(2) The Income Tax Officer and the Appellate Assistant Commissioner treated the said expenditure on note books and gift coupons as an expenditure incurred by the assessee by way of sales promotion within the meaning of section 37(3A) of the Act. On further appeal. The Tribunal did not express itself on this question. It did not find that the said expenditure cannot be treated as expenditure incurred by the assessee on sales promotion. It merely followed two earlier decisions of its own and held that the said expenditure has to be allowed as deduction u/s 37(1). The earlier decisions followed by it could not be made available to us. Before us there is a controversy as to the meaning of the expression "sales promotion." Mr. Ratnakar, learned counsel for the assessee, contends that the said expression "sales promotion" should be given a restricted meaning having regard to the preceding words "advertisement and publicity". According to him, these three words "advertisement, publicity and sales promotion" constitute a single concept while learned standing counsel for the Revenue says that the context does not permit the application of the rule of ejusdem generis. He says that the two "advertisement and publicity" preceding the words "sales promotion" decided do not form a class for applying the said principle. We are for the opinion that before we express our opinion on the question, it is just and proper that the Tribunal should express its opinion on the question whether the said expenditure can be treated as expenditure incurred on sales promotion or not. There should be a factual finding first. Eiter the Tribunal confirms the finding of the authorities below or differs. We, therefore, call upon the Tribunal to record its finding on the question whether the aforesaid expenditure can be treated as an expenditure incurred on sales promotion or not.