COMMISSIONER OF INCOME TAX Vs. AMARJEET KAUR

JUDGEMENT

(1.) In all these reference cases, the question of law and the facts referred by the Income Tax Appellate Tribunal, Bangalore Bench, Bangalore, for our consideration and decision is common and similar, and therefore, all these cases are taken up together, heard and disposed of by this common order.

(2.) The facts in ITRC No.48/1999 is noticed in this judgment for disposal of these reference cases. The assessee has her own proprietary business "Mis Manjog Home" and also gets share income from firms. For the assessment year 1985-86, the assessee is assessed in the status of "individual". M/s. Manjog Home was dealing in home appliances like refrigerators, television sets, electric and electronic goods, etc. The assessee as a proprietrix of M/s. Manjog Home had launched a sales promotion scheme known as "Deposit Linked Incentive Scheme" for the purpose of raising additional funds to extend her business. Under the Scheme, as noticed by the first appellate authority, the public are invited to become members by making deposits with the assessee and on the making of such deposits, goods dealt by the assessee of the value of about 75% of the deposit would be given free to the members as incentive/gift. The deposit so made by the members were returnable to the members without interest after the expiry of 5 to 10 years depending on the nature of the goods involved. Based on this Scheme, deposits were accepted from the members and goods and articles of the members choice was given to them as gift or incentive. The price of the article was credited as and when the issues were made in the Scheme and a like amount was debited as incentive in the profit and loss account.

(3.) The assessee debited the value of the goods supplied to the customers in a sum of Rs.27,27,191/- for the relevant assessment year in her profit and loss account and claimed the same as expenses towards "Deposit Linked Incentive Schemes" and the same amount was also credited by the assessee to the sales account increasing the amount of sales thereby. By this modus operandi, the assessee was able to mobilise deposit to the extent of Rs.41,92,920/- during the accounting period relevant to the assessment year under this Scheme. In the return of income filed for the relevant assessment year, the assessee had claimed allowance of the above mentioned amount as revenue expenditure for the purpose of income chargeable to tax. The same was disallowed by the assessing authority on various grounds. In sum and substance, the view of the assessing authority appears to be, that the expenses towards mobilising deposit cannot be allowed under Section 37 of the Income Tax Act, 1961 ('Act' for short), as revenue expenditure.