- (1.) WE have heard Shri Shambhu Chopra, learned counsel for the Income Tax Department. Shri N.C. Gupta appears for the respondent -assessee.
(2.) THIS Income Tax Appeal under Section 260A of Income Tax Act, 1961 arises out of an order dated 4.12.1998 passed by Income Tax Appellate Tribunal, Allahabad Bench 'A', Allahabad in ITA No.323 (Alld) of 1991 for assessment year 1984 -85. The appeal was admitted on the substantial question of law as follows: - "Whether the Hon'ble I.T.A.T. was correct in the interpretation of provisions of sub -section (3B) of Section 37 of I.T. Act, 1961 in view of explanation (a) appended to sub -section (3B) of Section 37 of I.T. Act, 1961?" Brief facts giving rise to the Income Tax Appeal are that the assessee filed a return for a loss of Rs.4,87,530/ - for the assessment year 1984 -85 relevant to previous year ending on 30.6.1983 on 25.6.1984. The assessment was framed under Section 143 (3) on the income computed at Rs.90,70,506/ - after giving adjustment of Rs.3051/ - in previous year; deduction under Section 35 -D as claimed of Rs.45,319/ -; deduction under Section 35 -B (Export Market Development allowance) as per assessee's claim of Rs.2720/ -; depreciation allowance (as per separate sheet attached) of Rs.87,95,174/ - deduction under Section 80 -G of Rs.5000/ - and investment allowance of Rs.25,837/ -. The unabsorbed investment allowance of 1983 -84 was allowed to be carried forward to the extent of Rs.8,93,689/ -. The assessment was made on the income found to be 'Nil'.
(3.) IN appeal the assessee claimed that the assessing officer aggregated the expenditure incurred by the assessee on advertisement, publicity and sales promotion of Rs.3,91,170/ -, vehicle upkeep expenses of Rs.2,33,062/ - and payments made to hotels of Rs.71,376/ - totalling Rs.6,95,608/ - and deducted there from Rs. 1 lakh, and disallowed 20% thereof under Section 37 (3A)/(3B) of the Income Tax Act, 1961 (the Act) on the remaining amount, which was not in accordance with the law. The assessee -appellant submitted that the assessment officer should have allowed deduction of Rs. 1 lac in respect of each item namely (1) advertisement expenses; (2) vehicle upkeep expenses and (3) payments to the hotels.;