IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No.91 of 2002 Date of decision: 20.7.2010 The Commissioner of Income Tax, Rohtak -----Appellant Vs. M/s The Atlas Cycle Industries Limited, Sonepat ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Krishan Kumar Mehta, Advocate for the revenue. Mr. Akshay Bhan, Advocate for the assessee. Adarsh Kumar Goel,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) against order dated 17.1.2001 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘A’, New Delhi in ITA No.3412/Del/94 for the assessment year 1988-89, proposing to raise following substantial questions of law:- “i) Whether, on the facts and circumstances of the case, the Income tax Appellate Tribunal was justified in law in allowing the expenditure of Rs.2,39,800/- being the cost of master production of ‘Atlas Goldline cycle’ films and negatives when it was not disputed that it was a Capital expenditure? ii) Whether, on the facts and circumstances of the case, the ITAT was justified in upholding the CIT(A)’s order directing ITA No.91 of 2002 deletion of disallowance made under section 40(c) of the Income Tax Act, 1961?” 2. The assessee derives income from manufacture and sale of cycles. During the assessment year in question, the assessee claimed expenditure under the head ‘Advertisement’ towards the cost of production of film which was disallowed on the ground that the capital expenditure was not permissible under section 37(3) of the Act. On appeal, the CIT(A) upheld the plea of the assessee that the expenditure was permissible under section 37(3) of the Act which view was upheld by the Tribunal. Further disallowance by the Assessing Officer was in respect of payments made to officers of the assessee under section 40(c) of the Act by holding the payments to be disproportionate. On appeal, the CIT(A) deleted the addition on that account which view was upheld by the Tribunal. 3. We have heard learned counsel for the parties and perused the record. 4. As regards question (i), the matter is concluded against the revenue by our recent order dated 8.7.2010 in CIT v. M/s Nuware India Limited in ITC No.19 of 1999, wherein following judgment of Himachal Pradesh High Court in Mohan Meakin Breweries Limited v. CIT (1979) 118 ITR 101 and other judgments, it was held that expenditure on advertisement even if it is in the nature of capital expenditure is covered under section 37(3) of the Act. Accordingly, this question has to be decided against the revenue and in favour of the assessee. 5. As regards, question (ii), we have, in the case of the assessee in ITA No.163 of 2002 (The CIT, Rohtak v.M/s The Atlas Cycle Industries 2 ITA No.91 of 2002 Limited, Sonepat), decided the issue against the revenue and in favour of the assessee. 6. In view of above, this appeal is dismissed. (Adarsh Kumar Goel) Judge July 20, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 3