Per Shri S. Rajaratnam, Accountant Member - This is departmental appeal arising out of the order of the Commissioner (Appeals) in the case of Sundeep Wines of Hyderabad for the assessment year 1980-81.
2. The assessee is a registered firm doing business in liquor. The assessee had claimed expenditure of Rs. 44,330 on advertisements. This amount represented presentations and compliments given to its customers according to the ITO. Since part of the outlay represented articles of value of Rs. 50 or below, the ITO was of the view that the value of such articles could be allowed as a deduction. The balance of Rs. 32,465 was sought to be disallowed because they represented articles of value of more than Rs. 50 per article. The assessee claimed that these were nothing more than discounts in kind inasmuch as the assessee had a sales promotion scheme under which the assessee gave away watches and time pieces depending upon the offtake. It is on this basis the articles were given. Details of the scheme and the details of the articles given away with the names of the parties were filed. The ITO was of the view that the expenditure of these articles was clearly in the nature of advertisement and, therefore, not to be allowed as a deduction under section 37(3A) of the Income-tax Act, 1961 (the Act).
The first appellate authority, however, found that the assessee who is a wholesale dealer of Indian made foreign liquors had attempted to promote its sales by presenting watches and time pieces when the offtake was more than certain limits. In the departmental appeal, it is claimed that the words advertisement, publicity and sales promotion under section 37(3A) would certainly comprehend the expenditure of the type encountered here. The learned representative for the assessee claimed that the expenditure was incurred in pursuance of a scheme and that it was in law a cash discount and, therefore, does not partake of the character of advertisement.
3. We have carefully considered the records as well as the arguments.
We do find that the assessee had a definite scheme under which it gave HMT watch for off take over Rs. 30,000, a Manov watch for off take over Rs. 25,000, a Jaz time piece for off take over Rs. 15,000 and a Jayco time piece for off take above Rs. 8,000. The assessee had also made over these articles in pursuance of the scheme. A list of disbursements of these articles with the names of the parties, the turnover in respect of them, etc., had also been furnished. It is the expenditure on these items which is now in dispute. A similar question had come up before this Tribunal in the case of another liquor dealer, namely, Coromandel Wine Corpn. of Vijayawada [IT Appeal No. 871 (Hyd.) of 1982] wherein the amount in excess of Rs. 50 was also allowed by this Tribunal following an earlier decision in IT Appeal Nos. 1027 and 1029 (Hyd.) of 1982, dated 29-4-1983. In the latter order (to which one of us was a party), the question as to what constitutes advertisement was discussed in the following words : "Advertisement according to Concise Oxford Dictionary is public announcement (esp. in newspapers, or posters, by television, etc.); advertising, .... Advertise has been similarly defined to mean generally or publicly known; (esp.) describe (goods), publicity with a view to increasing sales; notify .... Meaning assigned in other dictionaries are not different.
Though dictionaries need not always be the sole or a reliable guide on such matters, were find that the meaning assigned by the diction arises is the one assigned in commercial and popular parlance. The word advertisement has not been defined in the statue and hence we will be justified in assigning it the same sense as is given in the commercial world. Advertisement is publicity to the world at large with a view to attract potential customers. It is mainly addressed to future customer thought it may also be intended to retain present customers in a general sense. There is no quid pro quo between the outlay and the result. The articles in the assessees case however are given to actual buyers over prescribed quantities. Such quantity discount may be additionally given as further financial discount at specified rates. It may be given as extra supply of the goods sold as in the case of bakers dozen, where the baker given 13 pieces if a dozen is ordered. The thirteenth piece is not a gift or advertisement outlay but merely a quantity discount. In other words, the customer pays the reduced price for 13 pieces at the rate applicable to 12 pieces if purchased piece by piece. What the assessee has practised to a third variation in which there is neither extra financial discount or additional quantity supply but a different article is given as gift for bulk off takes. Here again, though it may be called as gift, it is not really a gift inasmuch as it is a discount, in different form for bulk purchase. From the customers viewpoint, it is only any abatement for bulk orders. Any other view would ignore the realities of commercial transactions and lay undue emphasis of mere nomenclature. Merely because the assessees name is engraved in the article, it does not become advertisement expenditure. We are, therefore, of the view that the expenditure on suit ceases and brief cases shared by the assessee under a scheme to be given to only those who have taken the prescribed quantities could not be treated as advertisement expense. Hence, there is no case for disallowance of Rs. 25,818 (Rs. 24,453 and Rs. 1,365). It is also possible to have the view that share of cost of the gifts enjoined under schemes sponsored by the principals was, in substance, an abatement of commission earned by the assessee and not an expenditure and much less an expenditure on advertising under section 37(3). In any view, rule 6B can have no application. The appeal succeeds on this point." Further, in IT Appeal No. 1255 (Hyd.) of 1982, dated 7-5-1983, similar expenditure by another liquor dealer was allowed though in that case the gifts were of articles below Rs. 50. In view of what has been stated here in before and on the facts of the assessees case, we have no doubt that the order of the first appellate authority deserves to be confirmed.