T.U. Mehta, C.J.
1. The Income-tax Appellate Tribunal has made this reference which arises out of the assessment, of the respondent's income for the assessment years 1968-69 and 1969-70. The simple question which is involved is whether the expenditure of Rs. 37,005 incurred for the assessment year 1968-69 and of Rs. 29,036 for the assessment year 1969-70 for advertisement by placing neon-signs would be deductible or not.
2. Assessee is a public limited company and carries on business of manufacture and sale of beer, Indian made foreign liquor, malt, food articles and soft drinks, and has its business branches in various parts of the country. For the furtherance of its business, the assessee advertises some of its goods by installing neon-signs. For the assessment year 1968-69, the assessee had claimed the deduction of the advertisement expenditure amounting to Rs. 37,005 and for the assessment year 1969-70, it has claimed a deduction of similar nature for the amount of Rs. 29,036. These deductions have been claimed under Sub-section (3) of Section 37 of the I.T. Act. It transpires that with regard to the assessment for the prior years the assessee was given deduction only for the expenditure incurred for the purpose of replacements but not for the purpose of installation. For these prior as well as the relevant assessment years the Tribunal has taken a view that the installations in question were of enduring character and, therefore, the expenditure incurred by the assessee on these installations of neon-signs is expenditure of capital nature and hence not allowable as deduct ion under Section 37. In view of this decision of the Tribunal, the assessee requested the Tribunal to make this reference which is relating only to the assessment years 1968-69 and 1969-70. The Tribunal has accordingly referred the following question to this court :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the expenditure of Rs. 37,005 and Rs. 20,036 for the assessment years 1968-69 and 1969-70, respectively, representing the cost and installation charges of neon-signs put up for advertising the products of the company at different places in various towns in India, including those at the dealers' premises was an expenditure of capital nature ?'
3. As will be seen hereafter, we are of the opinion that, having regard tothe provisions contained in Sub-section (3) of Section 37 of the Act, the question whether the expenditure in question is of capital nature or of revenue natureis wholly irrelevant. Therefore, in order to bring out the real dispute between the parties we reframe the question as under :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in disallowing the expenditure ofRs. 37,005 and Rs. 29,036 for the assessment years 1968-69 and 1969-70, respectively, representing the cost and installation charges of neon-signs put up for advertising the products of the company at different places in various towns in India, including those at the dealers' premises ?'
4. It is not in dispute that the expenditure in question is incurred by the assessee on advertisement. In fact, the assessee itself has claimed this expenditure as the one incurred on advertisement and the department has also treated the same as such. The Tribunal has rejected the deduction on the ground that the same cannot be allowed because the installations in question are assets of enduring nature and, therefore, any expenditure made on such assets would be expenditure of capital nature. It is thus obvious that the Tribunal is guided by the provisions of Sub-section (1) of Section 37 which says that any expenditure, not being expenditure of the nature described in Sections 30 to 36 and Section 80(vv) and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'.
5. We, however, find that the Tribunal has not considered the provisions of Sub-section (3) of Section 37, which is in the following terms :
'Notwithstanding anything contained in Sub-section (1), any expenditure incurred by an assessee after the 31st day of March, 1964, on advertisement or on maintenance of any residential accommodation including any accommodation in the nature of a guesthouse or in connection with travelling by an employee or any other person (including hotel expenses or allowances paid in connection with such travelling) shall be allowed only to the extent, and subject to such conditions, if any, as may be prescribed.'
6. Rules 6AC, 6B and 6D contemplate the conditions and restrictions under which expenditure on advertisement can be allowed. For the purpose of this reference we are not concerned with these rules.
7. It is obvious from the provisions of Sub-section (3) quoted above that it contemplates an altogether separate and distinct head of deduction, namely, expenditure on advertisement. It is further clear that this deduction on account of expenditure on advertisement is admissible 'notwithstanding anything contained in Sub-section (1)'. The use of the non obstinate clause in Sub-section (3) clearly excludes the considerations which are contemplated by Sub-section (1) of Section 37. It, therefore, follows that if once it is found that a particular deduction can be claimed as on account of expenditure on advertisement the said deduction squarely falls within Sub-section (3) and that being so the question whether the said expenditure is of capital nature or of revenue nature falls wholly out of consideration. Deduction on account ofexpenditure on advertisement is qua advertisement and not qua its revenue or capital nature. The Tribunal seems to have missed this aspect of the matter. We, therefore, find that this expenditure falling under Sub-section (3) of Section 37 should be treated as expenditure on advertisement and deduction on that account should be given not on consideration of the question whether it is of revenue or capital nature but on considerations of the conditions and restrictions contemplated by Sub-section (3) itself.
8. We accordingly answer the reframed question and send the matter back to the Tribunal for dealing with it according to law. There shall be no order as to costs.