Commissioner Of Income-Tax, Bombay City-I v. Merck Sharp And Dohme Of India Ltd.

S.K Desai, J.:— In this reference the following questions stand referred to us at the instance of the Commissioner by the Income-tax Appellate Tribunal, Bombay Bench ‘C’. For the assessment years 1963-64 and 1964-65:

“(1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to relief under section 84 of the Income-tax Act, 1961?”

For the assessment year 1963-64

“(2) Whether, on the facts and in-the circumstances of the case, the following sums are allowable as revenue expenditure:

(a) The sum of Rs. 19,096 representing the expenditure incurred in connection with the foundation laying ceremony.

(b) The sum of Rs. 2,476 representing the expenditure on printing additional articles of association of the assessee-company.

(c) The sum of Rs. 1,535 representing the legal expenses in connection with the alteration of the articles of association of the assessee-company?”

2. It would appear that items (b) and (c) of question No. (2) are concluded as far as this court is concerned by its decision and we are invited to give a brief answer without any elaborate statement of facts.

3. As far as question No. (1) is concerned, Mr. Dastur has referred to an unreported decision given on 11th August, 1977, in Income-tax Reference No. 32 of 1968 (CIT v. Merck Sharp & Dohme of India Ltd.—since reported in [1983] 140 ITR 334 (Bom) (Appendix) (infra)) for this very assessee where the decision of this court in Commissioner Of Income-Tax, Bombay City-I v. Bayer Agrochem Ltd., [1982] 134 ITR 240 (Bom) has been followed. In accordance with the said decision, question No. (1) is answered in the affirmative and in favour of the assessee.

4. As far as items (b) and (c) of question No. (2) are concerned, we are referred to the decision in CIT v. Tata Iron & Steel Co. Ltd., [1977] 106 ITR 363 (Bom). We are concerned with small amounts expended by the company for printing additional articles of association and for legal expenses in connection therewith. This item is specifically covered in the above decision. Accordingly, items (b) and (c) of question No. (2) will have to be answered in the affirmative and in favour of the assessee.

5. That brings us to the consideration of item (a) of question No. (2). It would appear that in the previous year ended on 30th November, 1962, the assessee put up at Bhandup a new plant for augmenting its production of pharmaceutical products. In connection with the foundation-stone laying ceremony of the factory, the assessee-company incurred expenditure on account of printing invitation cards, construction of a shamiana, hiring of furniture and transport. The aggregate expenditure came to Rs. 19,096. The question was whether this could be allowed as revenue expenditure.

6. The ITO disallowed it. The AAC, in the course of appeal; did not agree with the conclusions of the ITO stating that no new asset had been obtained or acquired by the assessee. He also found that the expenditure in question was incurred in the course of business carried on by them. When the matter was carried in further appeal to the Tribunal, the Tribunal agreed with the AAC.

7. In its decision the Tribunal has referred to the decision of the Madras High Court in Amarjothi Pictures v. CIT, [1968] 69 ITR 755. Mr. Dastur also drew our attention to the decision already adverted to, namely, CIT v. Tata Iron & Steel Co. Ltd., [1977] 106 ITR 363 (Bom), where the amount spent by the company on the publication of the brochure at the time of its golden jubilee was also allowed as revenue expenditure.

8. In our opinion, the Tribunal was not in any error in the view that it took and as regards this item also the finding of the Tribunal will have to be concurred with.

9. In the result, in respect of all the three items (a), (b) and (c), question No. (2) is also answered in the affirmative and in favour of the assessee. Parties to bear their own costs.