COMMISSIONER OF INCOME TAX Vs. BATA INDIA LTD

JUDGEMENT

(1.) Those two references--one under Section 256(1) of the Income-tax Act, 1961, and the other under Section 256(2) of the said Act--both at the instance of the Revenue, arise out of the appellate order of the Tribunal for the assessment year 1984-85. The following questions have been referred to this court : Income-tax Reference No. 91 of 1990 under Section 256(1) of the Act :

(2.) The only question referred in Income-tax Reference No. 91 and questions Nos. 1 and 2 in Income-tax Reference No. 1 of 1992 touch one and the same issue, namely, whether commission and discount allowed to wholesale dealers and retail agents fall within the import of the expression "sales promotion" occurring in Section 37(3A) of the Act. The fact is that, for the assessment year 1984-85, the previous year being the calendar year 1983, the Assessing Officer disallowed a sum of Rs. 23,33,638 under Section 37(3A) and computed the total income at Rs. 4,52,49,050.

(3.) Subsequently, the Commissioner of Income-tax called for and, on examination of the records of assessment, found that the assessee had claimed and was allowed expenditure of Rs. 6,31,76,886 as commission paid to wholesale dealers and retail agents. The Commissioner of Income-tax was of the view that the above amount was covered by the expression " sales promotion " under Section 37(3A) of the Act and, therefore, 20 per cent. of the same was to be disallowed. He has also observed that, in the absence of statutory definition of the term " sales promotion ", any expenditure for effecting sales, such as, sales organisation, commission paid to salesmen, etc., and whatever expenses which were in connection with sales would constitute an expenditure on " sales promotion ". He, accordingly, directed the Assessing Officer to recompute the total income of the assessee after applying his mind to the expenditure in question " by relating this to the provision of Section 37(3A) of the Act".