RAJESH BINDAL, J. - (1.) IN terms of directions given by this Court in ITC Nos. 60 and 61 of 1984, the following questions of law arising out of the order of the Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short "the Tribunal"), in ITA Nos. 118, 119, 163 and 164 of 1982 for the asst. yrs. 1979 -80 and 1980 -81, have been referred for opinion of this Court : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee firm is entitled to the deduction under s. 80J of the IT Act, 1961, on its own capital employed in the industrial undertaking in assets, such as the power generator, office equipment, furniture, etc., though it does not own the industrial undertaking which has only been taken on lease by it ?
(2.) WHETHER on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of s. 37(3A) which restrict the allowance of expenditure on publicity and advertisement are not applicable and that instead the provisions of s. 37(3D) apply to the case ? the plant and machinery, owned by M/s Rieta Biscuit Co. (P) Ltd. The assets taken on lease included land, factory building, plant and machinery, furniture and fixtures and other equipments. Even the use of brand name owned by the lessor was also permitted. For the asst. yr. 1979 -80, the assessee filed his return of income declaring the loss of Rs. 6,58,290.
(3.) DURING the course of assessment, it was found that the assessee had claimed deduction under s. 80J of the IT Act, 1961 (for brevity "the Act"), on the investment made by the assessee in generator, in office equipment and furniture in the factory taken on lease from M/s Rieta Biscuit Co. (P) Ltd. The claim made by the assessee was rejected at the time of assessment by the ITO. The assessee further claimed in the P&L a/c deduction of a sum of Rs. 3,48,468. There was also a claim of deduction of the sum of Rs. 11,208 as sales promotion expenses. The ITO, thus, worked about the amount of Rs. 3,59,676 (Rs. 3,48,468 + Rs. 11,208) and considered its admissibility keeping in view restrictions imposed in s. 37(3A) of the Act. According to the ITO, it was pertinent to note that the assessee had not set up any industrial undertaking as it had merely taken a factory on lease for a period of two years and the case of the assessee was, therefore, for these expenses not covered by the provisions of s. 37(3D) of the Act. He considered the claim of the assessee in accordance with the provisions of s. 37(3A) of the Act and disallowed a part of the claim. Similar was the position during the year 1980 -81.;