INNOSEARCH LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY THE COURT At the instance of the assessee, the following two questions of law said to be arising out of the Tribunal's order, dt. 24th Feb., 1984, in ITA 197/Ahd/1982 relating to the asst. year 1979 80 have been referred to this Court for its opinion :

(2.) THE question No. 1 relates to the claim of the assessee for deduction of increment in gratuity liability relating to previous year relating to assessment year in question amounting to Rs. 77,644. It was the liability projected in future and not actually discharged during the relevant previous year to the assessment year in question. Until before insertion of S. 40A(7) the claim of such increased liability of gratuity was governed by the provisions of S. 36, where a provision to that effect was made in the books of account or under S. 37 where method of accounting adopted by the assessee is mercantile system. However, with the insertion of S. 40A(7) position materially altered and no deduction in computing income under the head 'Profits and gains' of year of account by way of provision for gratuity be allowed except in accordance with conditions specified in cl. (b) of S. 40A (7). This position has been made beyond pale of doubt by the Supreme Court in Shree Sajjan Mills Ltd. vs. CIT (1985) 49 CTR (SC) 193 : (1985) 156 ITR 585 (SC) : TC 18R.685. As there is no dispute about the fact that the provisions of S. 40A(7) have not been complied in the present case our answer to question No. 1 is in the affirmative i.e., in favour of the Revenue and against the assessee.

(3.) FROM the perusal of the Tribunal's order we find that the sample material in respect of which the disputed expenses were incurred by the assessee were exhibited before the Tribunal along with other evidence. On considering the same, the Tribunal reached a finding that items like danglers are exhibited in the shops indicating the product which is marketed and sold by a particular dealer or retailer. Similarly posters, streamers exhibit various items dealt in by the assessee. Similarly tin plates showing various products dealt in by the manufacturers are also exhibited at providing places by the dealers. Though these items are stated to be as dealers aid they are more in nature of aim to the consumers, for whom it would be possible to locate the dealer who deals in these items. It certainly subserves the purpose of advertisement and publicity. Therefore, these items would fulfil the test of advertisement or publicity. The functions items perform have to be taken into consideration. It cannot be said that the functional use of these items could be divorced from the element of publicity or an advertisement can be added therein.