- (1.) THE following question of law has been referred for the opinion of this Court by the Tribunal, Amritsar Bench, Amritsar, "Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in holding that the expenses on account of commission amounting to Rs. 1,04,650 and the export markets development allowance amounting to Rs. 1,48,713 are not to be taken into account for the purpose of disallowance under s. 37(3A) of the IT Act, 1961.
(2.) THE assessee claimed deduction towards the commission and the export markets development allowance. The AO disallowed the same under s. 37(3A) of the IT Act, 1961 (for short, "the Act"). The CIT(A) allowed the claim of the assessee, which has been upheld by the Tribunal.
(3.) WE have heard learned counsel for the parties and perused the findings recorded. Learned counsel for the assessee, in support of the view taken by the Tribunal, relies upon the judgment of this Court in CIT vs. Indo Asian Switchgears (P) Ltd. (2002) 173 CTR (P&H) 102 : (2002) 257 ITR 645 (P&H), wherein it was observed (page 648) : "Admittedly, the provisions of s. 37(3A) of the Act place an embargo on the expenses incurred on the advertisement, publicity and sales promotion. This would mean that the expenses claimed by an assessee in connection with the advertisement, etc., have to be scrutinised and reduced in accordance with the slab prescribed in s. 37(3A) of the Act. However, a discount allowed by an assessee to an agent is not an expense in connection with the publicity or advertisement, etc. It is an amount forgone by the assessee in favour of the dealer for effecting the actual sale. It is not like the fashion show conducted by a garment manufacturer, but a commission allowed to a dealer. Trade discount cannot be treated as a wasteful expenditure incurred by an assessee in connection with the sales promotion. It is not a gift as given on a festival or a free sample as distributed by a pharmaceutical company to the doctors but an actual commission allowed or paid to a dealer. It does not fall within the mischief of s. 37(3A) of the Act." ;