Income-tax---

----Reference--- Businessexpenditure--- Disallowance---Expenditure on advertisement --- Expenditure on putting up stall in exhibition organised in connection with centenary celebrations of Congress party---Tribunal disallowing expenditure without considering provision of law and evidence on record---Tribunal's order gave rise to a question of law---Indian Income Tax Act, 1961, Ss. 37(2-B) & 256.

The assessee filed a return of income for the assessment year under consideration declaring a total income of Rs.1,31,55,490. The assessee to its return of income claimed a deduction of Rs.2,83,792, alleged to have been incurred by it in putting up a stall at the exhibition organised in connection with the Congress Centenary Celebration at Jaipur, claiming the same to be business expenditure. The Assessing Officer held that the expenditure was indirectly a contribution to a political party and disallowed the same in view of the provisions of section 37(2-B) of the Income Tax Act, 1961. The Tribunal confirmed the disallowance. On an application to direct reference:

Held, that the Tribunal had found that the expenses were in the nature of advertisement expenditure. The aforesaid finding arrived at by the Tribunal was without any discussion of the relevant provisions of law and also without any appreciation of the evidence on record. Hence, the question whether the Tribunal was correct in holding that the expenditure of Rs.2,83,793 incurred for putting up a stall at the exhibition organised in connection with the Congress Centenary Celebration fell under section 37(2-B) of the Act and was, as such, not an allowable business expenditure had to be referred to the High Court.

S.K. Aggarwal for Petitioner.

.B. Gupta for Respondent.

JUDGMENT

DR. M.K. SHARMA, J. ---In this petition under section 256(2) of the Income Tax Act, 1961 (hereinafter called, "the Act") relevant to the assessment year 1987-88, the assessee seeks to refer the following question for the opinion of this Court:

"Whether, on the facts and circumstances of the case, the Income tax Appellate Tribunal was correct in holding that the expenditure of Rs.2,83,793 incurred for putting up stall at the exhibition organised in connection with the Congress Centenary Celebration at Jaipur, falls under section 37(2-B) of the Act and was as such not an allowable business expenditure?"

The assessee filed a return of income for the assessment year under consideration declaring a total income of Rs.1,31,55,490. The assessee in his return of income claimed a deduction of Rs.2,83,792, alleged to have been incurred by it in putting up a stall at the exhibition organised in connection with the Congress Centenary Celebration at Jaipur claiming the same `to be a business expenditure. The case of the assessee before the Assessing Officer was that the aforesaid expenditure was not incurred on the publication of any advertisement and that the same was incurred on putting up a pavilion in the exhibition so as to promote the image and goodwill of the assessee. The Assistant Commissioner of Income-tax Central Circle, New Delhi, took up the assessment proceeding of the assessee for the assessment year under reference and passed the order of assessment in respect of the income amongst others, holding that the expenditure incurred by the assessee to the tune of Rs.2,83,792 was indirectly a contribution to a political party and disallowed the same in view of the provision of section 37(2-B) of the Act.

The assessee being aggrieved by the aforesaid assessment order preferred an appeal before the Commissioner (Appeals), who held that in view of the provision of section 37(2-B) of the Act, the Assessing Officer was right in disallowing it. On appeal having been preferred the income-tax Appellate Tribunal by order, dated February 15, 1993, confirmed the disallowance holding that the same was in the nature of advertisement expenditure.

Mr. S.K. Aggarwal, appearing for the assessee, took us through the impugned order of the Tribunal out of which the aforesaid question proposed as question of law is said to have arisen and submitted before us that the provision of section 37(2-B) of the Act is not at all applicable and the said amount of Rs.22,83,392 was in fact an allowable deduction as the business expenditure of the assessee.

We have also heard Mr. B. Gupta, learned counsel for the respondent who submitted before us that the question proposed in the present petition is a pure question of fact and as such no question of law arises therefrom. According to learned counsel for the Revenue, the question as to whether the amount of Rs.2,83,792 is an allowable deduction as a business expenditure or not is a question of fact and is concluded by the concluded finding of facts given by the Tribunal.

Section 37(2-B) of the Act was inserted by the Taxation Laws (Amendment) Act, 1978, with effect from April 1, 1979. The said provision bans deduction in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.

On a perusal of the impugned order passed by the Tribunal out of which the aforesaid question is said to have arisen, we find that the Tribunal on a consideration of the plea raised by the assessee and the submissions of counsel for the parties held that all such expenses are in the nature of advertisement expenditure. The aforesaid finding arrived at by the Tribunal was without any discussion of the relevant provisions of law and also without any appreciation of the evidence on record. From the order passed by the tribunal on the application under section 256(1), it appears that the tribunal simply held that the aforesaid finding of the tribunal is one of facts. Besides, on reading of the question proposed, it is crystal clear that a proper and correct interpretation of the provision of section 37(2-B) of the Act and applicability of the facts thereof are also involved in the present case.

In view of these circumstances, in our opinion, a question of law does arise in the present case and the question proposed, in our considered opinion, is a question of law. Accordingly, we direct the Tribunal to refer to this Court alongwith a statement of the case, the aforesaid question for the opinion of this Court.

In result, this petition is allowed, but without any costs.

M.B.A./1542/FCPetition allowed.