Expenditure incurred by an assessee for propaganda to preserve the status and reputation of its business is an admissible deduction against income under Section 10 (2) (xv) of the Income-tax Act, 1922.

( 1 ) AN interesting question of law has been raised in a reference made by the Tribunal under Section 66 (1) of the Indian Income-tax Act, 1922. The question arises out of the order of the Tribunal dated 26-11-1965 for the assessment year 1952- 53 and reads :-

"whether on the facts and in the circumstances of the case, thepayment of Rs. 22,951. 00 to the Vanaspati Manufacturers Association of India is a revenue deduction against the income of the previous year. ?"

( 2 ) THE petitioner which will hereafter be described as the assessee or assessee company, runs a number of mills including a mill for the manufacture of Vanaspati Oil. During the previous year ending 30th June 1951 the Vanaspati Manufacturers Association, Bombay of which the assessee is a member, debited the assessee with a total sum of Rs. 22851. 00. This amount represented the assessee s share of propaganda expenses incurred by the Association. The letter sent by the Association intimatical to the assessee that the expenditure was not on research but on propaganda to counter the agitation against the industry for compulsory colourisation of Vanaspati Oil or for the imposition of a ban on the manufacture of Vanaspati itself. The letter however stated that had the agitation, against the industry been allowed to go on unopposed, the industry would have been ruined. This amount was in addition to the expenditure incurred by the Association on research by contributions to the Council of Scientific and Industrial Research which was an approved scientific research institute.

( 3 ) IN connection with assessment for the relevant year the Income-tax Officer disallowed inter alia, the assessee s claim with the observaton that the amount represented the assessee s share for expenses on. research etc. as arranged by the Association. The Income-tax Officer was of the vew that as the assessee company had itself not incurred, the expenditure on scientific research relating to its business the expenditure could not be considered as an admissible item under Section 10 (2) (xii) of the Income-tax Act, 1922. The Income-tax Officer also observed that as Vanaspati association for the purposes of Section 10 ( 2) (xii) the question of admissibility of the amount did not arise for consideration. The Income-tax Officer was also of the view that the amount claimed did not fall under sub-section, (2) (xii), (xiii) and 2 (xiv) of S. 10 which appropriately deal with expenditure relating to scientific research and as such the assessee s claim was inadmissible.

( 4 ) WHEN the matter came up before the Appellate Assistant Commissioner the assessee company abandoned its plea on the ground of research and submitted that the amount claimed represented expendilure on propagranda. The Appellate Assistant Commissioner was of the view that the propaganda carried on by the Vanaspati Manufacturers Association was not for the preservation of the assests or the business of the assessee but was to counter the inquiry which had been made in public as well as in. Parliament on the question as to whether Vanaspati ghee was had for health and that some sort of colourisation of Vanaspati was necessary in order to distinguish it from pure ghee. The Appellate Assistant Commissioner was of the opinion that colourisation of Vanaspati did not mean extinction of the vanaspati business because even if vanaspati was coloured and the colour was of edible substance, the masses in the country who were too poor to purchase pure ghee, would have still to purchase Vanaspati, to get the necessary fat contents for their food. The Appellate Assistant Commissioner accordingly up-held the dis-allowance.

( 5 ) ON second appeal before the Tribunal the assessee relied on the Annual Report of the Vanaspati Manufacturers Association of India for 1950-51 and observed that a campaign was carried on for compulsory colourisation of Vanaspati but at no time was there any question of its manufacture and sale being banned co