Per Sir F. C. Rustagi, Judicial Member - The only dispute raised by the department in this appeal pertains to deletion of addition of Rs. 53,391 made out of advertisement expenses by the ITO.2. The assessee is a renowed manufacturer and seller of soft drinks formerly Coca Cola and allied products, and after July 1977, that of Campa Cola and Campa Orange, etc. The assessment year involved is 1977-78 for which the relevant previous year ended on 31-8-1977. A sum of Rs. 60,891 was disallowed by the ITO out of advertisement expenses out of total expenses of Rs. 1,87,593. The Commissioner (Appeals) while dealing with the issue in the assessees first appeal before him, deleted the same observing that the company had started manufacturing a new commodity and, therefore, sampling and advertisement was necessary.
When the matter at the instance of the revenue came before the Tribunal, the Tribunal restored it back to the file of the Commissioner (Appeals) observing that the decisions of the Commissioner (Appeals) was on a wrong premise. However, the Tribunal sent the matter back to be readjudicated on merit. The Commissioner (Appeals) again considered the submissions of those of the assessee and finding that Rs. 7,500 was spent on account of stalls put on Congress Session and balance was on sample distribution, on the basis of past history in the assessees case, allowed the same and ordered the deletion of the addition made by the ITO.3. It is this action of the Commissioner (Appeals) which is disputed by the revenue before us. The learned departmental representative Mr. M.P. Singh submitted that during the relevant accounting period for 1977-78 under consideration, it was mostly sale of old product Coca Cola, and, therefore, there was no question of popularising the drink, as alleged by the assessee, by free sampling. The learned counsel for the assessee, Mr. D. R. Behl, mainly relied on the normal practice of free samples given by the assessee and allowed in the past and future.
He submitted that it is a sort of discourt and it is by the order of the managing director and other officers that free samples are given.
He placed on the assessees compilation a voluminous list of total expenses on advertisement. He, however, pointed out from his file that on certain dates, orders were passed by the managing director that free samples are given to such and such persons. However, he could not show the bill nor could he give address of such persons etc. Even on asking of the Bench, he was unable to show why free samples were given to certain individuals specially occasion of wedding, bhog ceremony, birthdays, etc., but he was not in a position to explain that out. Over and again, he submitted, it has been claimed and allowed in the past, and future all through.
4. It is trite law by now that every assessment year is independent.
May be that the revenue in the past did not bother to look into the assessees claim due to insignificance of its percentage over the sales.
Even during the year under consideration, it was 0.25 per cent while earlier it was only 0.09 per cent and 0.10 per cent in the immediately two preceding years. But once the revenue has gone into investigation of a particular item, its allowance is to be adjudicated merit.
Regarding sampling, there has to be some uncodified code. We could appreciate the submission of the learned counsel for the assessee that in Congress Secession and sports meet, etc., free sampling is given as their name is also displayed. But in respect of private parties friends and relations employees or people who are obliged by the assessee, question of putting up a board that Coca Cola/Campa Cola is served free, is out of question. It is only the assessee and the recipient of free samples who knowns the nature of drinks and purpose of court is best known to them. Out of the list placed on pages 13 to 27 of the paper book, certain items give very interesting reading such as free sampling given to Shri Pritam Singh on his daughters marriage, in August 1976, Shri Mihinder Singh on his daughters marriage, Shri Harcharan Singh and Shri Mohinder Singh, etc. As abovesaid, we appreciate the assessees claim in respect of free sampling to Gurdwara Rara Sahib and even amount of month to month consumption probably freely served by the assessee and also free sampling given to athletes.
But we are unable to accept the contention that in case of private persons where free drinks are supplied by the assessee on occasions of marriages, birthdays, bhog ceremony, etc., it could be for the purpose of advertisement. We have thoroughly gone through the entire list. Out of total addition ordered to be deleted by the Commissioner (Appeals) in a sum of Rs. 53,391, we are unable to confirm his action in respect of Rs. 41,768, details of which are placed below : To C/o free sampling given to Shri A. P. Singh, Assistant Accounts Officer.
To C/o free sampling given to Shri Harmohinder Singh and Shri Harcharan Singh.
To C/o free sampling given to Shri A. P. Singh, Assistant Accounts Officer.
To C/o free sampling given to Shri Kulwant Singh and Shri Jagdish Kumar.
To C/o free sampling given to Shri M. S. Rekhi on his daughters marriage.
To C/o free sampling given to Shri Avtar Singh Gill on his daughters marriage.
To amount of free sampling given to Shri Yajjan Singh and Shri Jaswant Singh.
To C/o free sampling to Shri Daulat Ram Khanna and Shri Amar Singh on his daughters marriage.
To C/o free sampling given to Shri H. S. Dhillon on his daughters marriage.
To amount of free samping given to Shri Mohinder Singh to his daughters marriage and Government Middle School, Chandigarh.
To C/o free sampling given to Shri Harcharan Singh and Shri Mohinder Singh.
To C/o free sampling given to Shri Pritam Singh on his daughters marriage.
To C/o free sampling given to Shri Mohinder Singh on his daughters marriage.
To amount of free sampling given to Shri B. P. Gupta and Shri Arjinder Singh.
5. Before we part with the matter we may observe that the assessees claim in respect of free sampling, as detailed above, is nothing but an action of obliging friends and relations and it cannot be permitted to be deducted legally as advertisement expenses.