COMMISSIONER OF INCOME TAX Vs. TIRRIHANNAH CO LTD

JUDGEMENT

(1.) This reference under Section 256(2) of the Income-tax Act, 1961, relates to the assessment year 1977-78. The assessee derives income from manufacture and sale of tea. The assessee claimed that it distributed tea samples to its shareholders, directors and friends. The Income-tax Officer did not consider this expenditure for the purpose of business. He valued the quantity of tea according to the market rate and, accordingly, added it as the income of the assessee.

(2.) The assessee, in appeal, contended that the distribution of tea samples was done for the purpose of the business. This argument of the assessee was not accepted and, accordingly, the Commissioner of Income-tax (Appeals) confirmed the addition.

(3.) Counsel for the assessee urged that the assessee was manufacturing tea. Tea was distributed to the shareholders who were present at the annual general meeting. An additional quantity was given as complimentary to directors and friends. The distribution of the samples and complimentary tea was made in the interest of the business. The distribution was made to popularise the tea manufactured by the company and it was done for commercial expediency and, therefore, the expenditure was allowable.