GRIFFEN LABORATORIES LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) On an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion :

(2.) The assessee is a manufacturer of medicines. The relevant assessment year is )985-86. During the course of assessment, the Assessing Officer, inter alia, found the assessee claimed Rs. 2,45,780 as expenses on medical literature and journals and also distributed free samples of medicines to doctors and physicians to the tune of Rs. 10,88,920. The Assessing Officer has treated these expenses for advertisement and sales promotion and disallowed 20 per cent, of the expenditure under Sub-sections (3A) and (3B) of Section 37 of the Act. In appeal the Commissioner of Income-tax (Appeals) has allowed the total expenditure on samples but he sustained the order of the Assessing Officer, so far it relates to the expenditure on medical literature and journals, distributed by the assessee-company. In appeal before the Tribunal, the Tribunal has also held against the assessee that the provisions of Sub-sections (3A) and (3B) of Section 37 are applicable.

(3.) Learned counsel for the assessee submits that the identical issue has been considered by this court in the case of CIT v. The Statesman Ltd. [1992] 198 ITR 582 and he also referred to the part of the speech of the Finance Minister while inserting the provisions of Sub-sections (3A) and (3B) in the statute. He emphasised mainly on the facts that the provisions of Sub-sections (3A) and (3B) can be invoked only when the expenses are extravagant and avoidable, if the expenses are in the normal course the provisions of Sub-sections (3A) and (3B) are not attracted.