Expenditure incurred for advertising in souvenirs of organizations, even if it has an element of charity, is deductible as business expenditure if the primary and dominant motive is to promote the business.

( 1 ) IN this reference, under Section 256 (2) of the Income-tax Act, 1961, we are concerned with the following question of law :"whether, on the facts and in the circumstances of the case, the Tribunal had any material before it to hold that the amount of Rs. 5,750 paid by the company to various parties for advertisement of the company through the souvenirs published by the respective parties were not laid out or expended wholly and exclusively for the purposes of the business ?"

( 2 ) THE reference relates to the assessment year 1965-66. The previous year ends on March 31, 1964. The assessee is a manufacturer and seller of electrical pumps and motors. In the assessment year, the assessee advertised its products in souvenirs published by various organisations and institutions and claimed deductions of the sums paid to those organisations and institutions as charged by them for inserting those advertisements.

( 3 ) THE Income-tax Officer disallowed the claim of the assessee. On first appeal, a sum of Rs. 745 was only allowed by the Appellate Assistant Commissioner who rejected the rest of the claim by holding that the primary and dominant motive of the assessee in publishing the advertisements in the souvenirs of the American Women's Club Welfare Fund, Indian National Trade Union Congress, West Bengal Pradesh Congress Committee, Moral Rearmament, 24-Parganas Zill Sanskriti Parishad, Rabindra Palli Sarbajonin Durgotsab Committee, Baranagar, Bharatiya Sanskriti Bhawan and Loireto House was to make charity to those organisations and institutions.

( 4 ) THE Tribunal, on second appeal, partly allowed the claim of the assessee, but disallowed, under Section 37 (1) of the Income-tax Act, 1961, the sums paid to the American Women's Club Welfare Fund, Bharatiya Sanskriti Bhawan, West Bengal Pradesh Congress Committee and Moral Rearmament by affirming the decision of the Appellate Assistant Commissioner and thereafter the Tribunal rectified certain mistakes in its order under Section 35 of the Act.

( 5 ) AT the time of hearing of the appeal the Tribunal wanted to see those souvenirs for the purpose of ascertaining the nature of the advertisements published in those sovenirs and to satisfy itself as to whether those souvenirs could reach the hands of an adequate number of persons with whom the assessee intended to establish business relationship through the media of those advertisements, but unfortunately those souvenirs could not be produced by the assessee as recorded by the Tribunal. The Tribunal found, as a fact, that there was an element of advertisement in all those insertions but disallowed the amounts paid to those organisations in the following terms :"looking into the nature of the organisation or institution concerned and the amount of payment we see that in some of the cases that will be mentioned shortly the primary and dominant motive for the payment was charity and the payments were not out of considerations of business. "

( 6 ) IT is to be noticed here that the Tribunal allowed, amongst other claims, Rs. 250 paid to the Indian National Trade Union Congress, Rs. 50 paid to Rabindra Palli Sarbajanin Dargotsab Committee, Baranagar, and Rs. 100 to Loretto House, but disallowed Rs. 250 paid to the American Women's Club Welfare Fund, Rs 1,000 paid to Bharatiya Sanskriti Bhawan, two sums of Rs. 1,000 and Rs. 1,000 paid to the West Bengal Pradesh Congress Committee and Rs. 1,000 paid to Moral Rearmament by the assessee.

( 7 ) IT is an admitted fact that the assessee has actually paid those sums to those organisations and the genuineness of those payments has not been questioned by the revenue. It has been found by the Tribunal, as a fact, that there was an element of advertisement in making those insertions in those souvenirs and those advertisements were in fact published by those organisations.

( 8 ) THE submissions made before us by Dr. Pal, the learned counsel for the assessee, are as follows : those expenditure