GIFTS FALLING WITHIN THE PURVIEW OF SECTION 37(3) OF THE INC

HIGH COURT OF DELHI Shriram Pistons & Rings Ltd. v. CIT ITR No. 70/1988 April 29, 2008 HIGH COURT OBSERVED, INTER ALIA, AS UNDER : ** ** ** ** 31. It appears from the statement case that it is not actually the Assessee that directly spending any amount on gifts. The gifts were given by the dealers of the Assessee to their customers and the Assessee was merely reimbursing the dealers to the extent of value of the gifts. 32. A perusal of section 37(3) shows that expenditure incurred by the Assessee on advertisement would be allowed as a deduction subject to prescribed conditions. Rule 6B of the Income Tax Rules, 1962 prescribed a cailing which was Rs. 50 in respect of each article. The statement of case shows that the gifts given by the dealers of the Assessee did not bear the logo and name of the Assessee nor did the gifts emanate from the coffer of the Assessee in any manner. Consequently, insofar as the customer is concerned with was the Assessee. Under these circumstances, the gift given by the dealer to the customer did not have any advertisement value insofar as the Assessee is concerned. 33. In Commissioner of Income Tax vs. Indian Aluminium Cables Ltd. [1990] 183 ITR 611, a Division Bench of this Court laid emphasis on the advertisement value of the gift, but, as learned counsel for the Revenue has rightly pointed out the gifts in that decision pertained to gifts made during festive occasions including weddings. To this extent, the decision relied upon by learned counsel for the Assessee may not be relevant but it is nevertheless appropriate to refer to this decision because it deals with the advertisement value of the gift which is what rule 6B of the Rules also deals with. If a gift does not have any advertisement value, it cannot be deemed to fall within the category of “advertisement” as under stood for the purposes of Rule 6B of the Rules. 34. In Commissioner of Income Tax vs. Modi Spinning and Weaving Mills Co. Ltd. [1993] 202 ITR 708, a Division Bench of this Court held that rule 6B of the Rules would apply only when there is presentation of articles by way of advertisement. If this is so, insofar as the present case is concerned , since we have held that the gifts given by the dealers to their customers were not in the nature of advertisement, they would not fall within the financial limits as laid down under rule 6B of the Rules.