Judgment :- MISHRA J. The Income-tax Appellate Tribunal, Madras Bench "D", has referred under section 256(1) of the Income-tax Act, 1961, the following two questions "(1) Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 37(3) read with rule 6B of the Income-tax Rules, 1962, the Income-tax Officer was not correct in disallowing Rs. 2, 750 and Rs. 6, 188 being the advertisement expenses ? (2) Whether the Appellate Tribunal's view that the provisions of section 40A(3) alone should be applied to the assessee's case and not rule 6B(3) to regulate advertisement expenses is sustainable in law ?" Since the two questions overlap and when we see the statement of the case, we are of the opinion that the questions aforementioned should be addressed in all aspects of the scheme of the law on the subject of deduction of expenditure in computing the income chargeable under the head "Profits and gains of business or profession", we propose to first notice the facts that form the core of the statement of the case and then follow the scheme of the law for our conclusions The assessee is a money-lender, who it is said, purchased certain gift articles and distributed them to his customers at the commencement of a new chit subscription. The assessee claimed deduction of this expenditure while computing the income for tax on profits and gains of business or profession. The Income-tax Officer, however, held that since the amount of gift exceeded Rs, 2, 500 and thus should have been paid only by cheque under the law, the assessee was not entitled to claim the same as a valid and acknowledgeable expenditure under the Act and the Rules The Income-tax Officer disallowed another amount of Rs. 6, 188 as, according to him, the cost of each article was more than Rs. 50 and thus it fell under rule 6B(1)(a) of the Income-tax Rules, 1962. The assessee appealed. The Commissioner of Income-tax (Appeals), however, sustained the disallowance of Rs. 2, 750 by the Income-tax Officer, but reversed the latter's order with respect to Rs. 6, 188 on account of the gift articles holding on the facts that the value of each article did not exceed Rs. 50. The assessee appealed to the Tribunal against the disallowance of Rs. 2, 750. 2, 750 by the Income-tax Officer, but reversed the latter's order with respect to Rs. 6, 188 on account of the gift articles holding on the facts that the value of each article did not exceed Rs. 50. The assessee appealed to the Tribunal against the disallowance of Rs. 2, 750. Before the Tribunal, however, a controversy arose whether rule 6B(3) would exclude the application of section 40A(3) of the Income-tax Act, 1961For the reasons stated in its order, the Tribunal has found as follows "Rs. 2, 750 : this is admittedly an expenditure for advertisement. Rule 6B(3) framed under section 37(3) of the Income-tax Act, 1961 (expenditure on advertisement), provides that any expenditure on advertisement for which payment has been made in a sum exceeding Rs. 2, 500 shall not be allowed as a deduction in computing the total income unless such payment is made by a crossed cheque drawn on a bank or by a crossed bank draft. While this rule relates only to expenditure on advertisement, there is another section of the Act itself, section 40A(3) and the Rules framed thereunder, viz., rule 6DD which prohibits the deduction of any expenditure in respect of which payment is made in a sum exceeding Rs. 2, 500 otherwise than by the crossed cheque drawn on a bank or by a crossed bank draft. Rule 6DD framed under this section 40A(3) gives out many saving clauses from such expenditure in cash being disallowed. There is also a circular issued by the Board with regard to the disallowance of this expenditure under section 40A(3). On the other hand, rule 6B(3) is an absolute one with no saving clauses or circular to mitigate its rigour. Both rule 6B(3) and section 40A(3) permit the disallowance. The only thing is that section 40A(3) is less onerous and burdensome with a circular issued to mitigate its rigour. It is not known to us from the assessment order, or during the course of hearing at the Bar as to which of the provisions are invoked by the Income-tax Officer for this disallowance. The Commissioner of Income-tax (Appeals) invoked only rule 6B(3). He also seems to have invoked rule 6B(1) which provides that the disallowance in respect of expenditure on advertisement shall not exceed in respect of articles intended for presentation Rs. 50 on each of such articles. The Commissioner of Income-tax (Appeals) invoked only rule 6B(3). He also seems to have invoked rule 6B(1) which provides that the disallowance in respect of expenditure on advertisement shall not exceed in respect of articles intended for presentation Rs. 50 on each of such articles. By invocation of rule 6B(1), the Commissioner of Income-tax (Appeals) seems to think that the full disallowance of Rs. 2, 750 can be sustainedOne of the submissions of the assessee before us is that under rule 6B(3) only that much in excess of Rs. 2, 500 could only be disallowed and that, therefore, Rs. 2, 500 should in any event be allowed. We cannot agree with the assessee. If rule 6B(3) is to be invoked the whole expenditure paid in cash can be disallowed. The wording of rule 6B(3) is very clear to that effect But what we think is that when two provisions of equal force are there to disallow an expenditure, rule 6B(3) and section 40A(3), the authority should resort only to the less onerous. It has also to be noticed that section 37(3) does not lay down any guidelines to frame a rule like rule 6B(3). Further, section 37(3) under which rule 6B(3) has been framed, does not supersede section 40A(3) read with sub-section (1) but supersedes section 37(3) of the Income-tax Act, 1961. It is, therefore, section 40A(3) and the rule framed thereunder, i.e., rule 6DD only. The Commissioner of Incometax (Appeals) was not justified in resorting to rule 6B(3) which contains no saving clauses. If the Income-tax Officer had really invoked section 40A(3), the assessee was entitled to my that his case fell under the saving clauses or that he was entitled to the benefit of the circular. That right will not be available and is taken away if the Commissioner of Income-tax (Appeals) attempts to justify the disallowance under rule 6B(3). We cannot justify or we cannot permit the authorities to sustain the disallowance under rule 6B(3), when a less onerous and overriding provision in section 40A(3) is there. So that this amount can be disallows only under section 40A(3) read with the relevant rules and circular issued by the Board. That aspect of the matter has not been gone into by any one. So we are referring the case back to the Income-tax Officer. The Income-tax Officer will apply only section 40A(3). So that this amount can be disallows only under section 40A(3) read with the relevant rules and circular issued by the Board. That aspect of the matter has not been gone into by any one. So we are referring the case back to the Income-tax Officer. The Income-tax Officer will apply only section 40A(3). He will give the assessee then an opportunity to establish that this expenditure is saved by the relevant rule 6DD and the circular issued by the Board to the effect that under certain circumstances where the expenditure is genuine and the recipient identifiable, section 40A(3) need not be invoked. The Income-tax Officer may also, if so advised, invoke rule 6B(1), which provides that the article intended for presentation should not cost more than Rs. 50. But then in that case he will also consider whether only amounts in excess of Rs. 50 per article can be disallowed or the entire amount itself as is soon suggested or indicated by the Commissioner of Income-tax (Appeals)On the expenditure, however, of Rs. 6, 188, the Tribunal noticed that all questions except the question as to the application of rule 6B(1) were similar to the above concern as to the dealings of Rs. 2, 750 and ordered as follows" Rs. 6, 188. Here the Income-tax Officer has invoked rule 6B(1). But the Commissioner of Income-tax (Appeals) has stated clearly that there is no scope for application of rule 6B(1) as each item cost only less than Rs. 50. So, rule 6B(1) has no application for this expenditure. Then the other question is similar to the item of Rs. 2, 750 discussed above. So this expenditure also is referred back to the Income-tax Officer for application of section 40A(3) with opportunity to the assessee to establish his case if any, under rule 6DD and the relevant circular issued by the Board. We once again make it clear that rule 6B(1) has no application to the facts of the case. 2, 750 discussed above. So this expenditure also is referred back to the Income-tax Officer for application of section 40A(3) with opportunity to the assessee to establish his case if any, under rule 6DD and the relevant circular issued by the Board. We once again make it clear that rule 6B(1) has no application to the facts of the case. "The Revenue, however, has burdened the proceedings by the above two questions that are referred to this court by the Tribunal for proper answer What strikes first on a consideration of the issues as to the disallowance or allowance for the purpose of computation of income chargeable under the head "Profits and gains of business or profession", is the mention of the general scheme under section 37(1) of the Act that any expenditure not being expenditure of the nature described in sections 30 to 36 and section 80VV, and not being of 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 will be allowed in computing the income chargeable under the head "Profits and gains of business or profession". All these expenses are enumerated in sub-sections (2), (2A), (2B) and sub-section (3) of section 37, the last being the mainstay of the contention of learned counsel who is appearing before us on behalf of the Revenue. This sub-section reads as follows"* 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 guest house 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. "The extent and condition of the expenditure on advertisement or on maintenance of any residential accommodation incurred by an assessee after the 31st day of March, 1964, are prescribed under rule 6B, which puts forward as a condition of the allowance in respect of expenditure on advertisement, a limit of Rs. "The extent and condition of the expenditure on advertisement or on maintenance of any residential accommodation incurred by an assessee after the 31st day of March, 1964, are prescribed under rule 6B, which puts forward as a condition of the allowance in respect of expenditure on advertisement, a limit of Rs. 50 on each article intended for presentation within India and in respect of any advertisement outside India involving payment in foreign currency, the amount covered by foreign exchange granted to, or permitted to be acquired by, the assessee for this purpose under the law relating to foreign exchange for the time being in force Apart from the discretion of the Income-tax Officer as envisaged under this rule to disallow any expenditure which is in his opinion excessive or unreasonable, in sub-rule (3) of rule 6B, it is stated" Any expenditure on advertisement for which payment has been made in a sum exceeding Rs. 2, 500 shall not be allowed as a deduction in computing the total income unless such payment is made by a crossed cheque drawn on a bank or by a crossed bank draft. "The Revenue's stand before the Tribunal as well as before us is categorical that unless the assessee has made payments by a crossed cheque drawn on a bank or by a crossed bank draft, it shall not be entitled to deduct such expenditure in computing the total taxable income. The assessee has, however, maintained throughout that once the expenditure is not disputed and it is not found to be excessive or unreasonable, allowance in this behalf as contemplated under section 40A should not be deniedThe general rule is that in respect of all expenditure, no disallowance will be ordered where payment in a sum exceeding Rs. 2, 500 is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in such cases having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors The Revenue's submissions before us get summarised thus (i) Section 37(3) is a provision by way of an exception to the general rule of allowance in computation of the income chargeable under the head "Profits and gains of business or profession" in so far as the expenditure on advertisement or on maintenance of any residential accommodation is concerned. Since this is a special provision and this has been subjected to a clear restriction that any deduction will be allowed only to the extent and subject to such conditions as may be prescribed, full compliance with the requirements of rule 6B alone will enable the assessee to claim deduction of any expenditure on any advertisement According to learned counsel appearing for the Revenue, section 40A has to be applied in cases which are not covered by the specific provisions of the Act like what is found in the items envisaged under various sections and sub-sections of the Act including section 37(3) of the Act. Sub-section (3) of section 40A and rule 6DD, according to him, for this reason alone, are not available to the assessee, who is not showing compliance with rule 6B(3). He has brought in support of his argument a judgment of this court in the case of CIT v. Carborundum Universal Ltd. The assessee-company, Carborundum Universal Limited of the said case, claimed that it had contributed a sum of Rs. 17, 575 to its United Kingdom counterpart towards a superannuation fund, which it was entitled to deduct while computing the profits or gains of the business of the assessee under section 28 of the Income-tax Act. Answering the reference, the court considered in particular two judgments of the Supreme Court on which the Tribunal had placed reliance and stated as follows"* The Tribunal, after referring to the decision in CIT v. Mysore Sugar Co. Ltd. and also the decision in Calcutta Co. Ltd. v. CIT, held that the contribution to the superannuation fund is reasonably attributable as business expenditure and, therefore, it can be deducted under section 28 of the Act itself. It is only on this basis that the appeal preferred by the assessee was allowed by the Tribunal. It is thereafter, at the instance of the Department, that the Tribunal has referred the question set out above for the opinion of this court For the purpose of deciding this question, it is necessary to refer to the relevant statutory provisions. It is only on this basis that the appeal preferred by the assessee was allowed by the Tribunal. It is thereafter, at the instance of the Department, that the Tribunal has referred the question set out above for the opinion of this court For the purpose of deciding this question, it is necessary to refer to the relevant statutory provisions. Section 28 of the Act, so far as is relevant for the purpose of this case, states that the income shown thereunder shall be chargeable to income-tax under the head 'Profits and gains of business or profession' and under item (i) is shown 'the profits and gains of any business or profession' which was carried on by the assessee at any time during the previous year. Section 29 states that the income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43A. Sections 30 to 43A deal with specific items which may be deducted in computing the profits and gains of business. Section 36 has the marginal note 'other deductions' and it enumerates certain deductions therein which should be made in computing the income referred to in section 28. Sections 30 to 43A deal with specific items which may be deducted in computing the profits and gains of business. Section 36 has the marginal note 'other deductions' and it enumerates certain deductions therein which should be made in computing the income referred to in section 28. One such deduction is contained in section 36(1)(iv) and the same is as follows 'Any sum paid by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the provident fund or approving the superannuation fund as the case may be ; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contribution's fixed on some definite basis by reference to the income chargeable under the head "Salaries" or to the contributions or to the number of members of the fund.'Section 37, with the marginal note 'general', states in sub-section (1) thereof 'Any expenditure (not being expenditure of the nature described in sections 30 to 36 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".' As we have pointed out already, the Tribunal has taken the view that the expenditure involved in the present case is of a nature described in section 36(1)(iv) and, therefore, the residuary provision contained in section 37 will not be attracted. However, the Tribunal allowed the deduction under section 28 itself holding that any expenditure incurred for the purpose of carrying on business can be deducted for arriving at the true profits and gains of the business. The question for consideration is whether this conclusion of the Tribunal is correct or not We are of the opinion that the above view of the Tribunal is not correct. The question for consideration is whether this conclusion of the Tribunal is correct or not We are of the opinion that the above view of the Tribunal is not correct. Simply as a matter of construction we reach the conclusion that once a particular item of expenditure is of the nature specifically described in any of the statutory provisions contained in sections 30 to 43A of the Act, the said expenditure cannot be deducted under section 28 simply because it does not become eligible for deduction under the specific provision. "Learned counsel for the Revenue has drawn inspiration, it appears, from the conclusion" . . . . once a particular item of expenditure is of the nature specifically described in any of the statutory provisions contained in sections 30 to 43A of the Act, the said expenditure cannot be deducted under section 28 simply because it does not become eligible for deduction under the specific provision. "According to learned counsel, sub-section (3) of section 37 has made a specific provision as to the deduction of the expenditure on advertisement, etc., and it cannot be made subject to another provision, that is, section 40A We, however, find it difficult to go by the arguments of learned counsel for the Revenue for reasons that appear to us so obvious that at one stage, we asked learned counsel for the Revenue to report to us whether, in any other case, any objection was raised by any officer of the Revenue in the country and if such objection was raised, how it was resolved. Learned counsel for the Revenue has not been able to inform us about any other case of this kind Section 40A opens with the words :" The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head 'Profits and gains of business or profession'. "It is difficult for the Revenue to contend before us that what is provided under sub-section (3) of section 37 is not a provision relating to the computation of income under the head "Profits and gains of business or profession". "It is difficult for the Revenue to contend before us that what is provided under sub-section (3) of section 37 is not a provision relating to the computation of income under the head "Profits and gains of business or profession". Thus assuming there are inhibitions as prescribed as contended by learned counsel for the Revenue under sub-section (3) of section 37 of the Act, they are removed by the specific legislative command, such provisions relating to the computation of income shall have no effect if they are in conflict with anything contained in section 40A The law stated in the judgment of this court is not one which has taken notice of section 40A and accordingly it is not an authority laying down as contended by learned counsel for the Revenue that expenditure on advertisement which is covered by sub-section (3) of section 37 of the Act shall suffer the inhibition under the Rules and the assessee shall not be permitted to seek the protection under the proviso aforementionedRule 6DD of the Income-tax Rules, 1962, says" No disallowance under sub-section (3) of section 40A shall be made where any payment in a sum exceeding two thousand five hundred rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in the cases and circumstances specified" in it and has given a list of several payments. It is more or less provided in the language of sub-rule (3) of rule 6B, but it is one intended to carry out the purpose of the prescription under section 40A. Rule 6B has been retained, it seems, in particular to keep away those claiming deduction in the name of expenditure on advertisement that they should keep such expenditure in line with what is contemplated under sub-section (3) of section 37 of the Act. Merely because the provision in sub-section (3) of section 37 and rule 6B are so retained and what is introduced as an expenditure by way of a proviso in section 40A of the Act is not indicated in rule 6B or in any other rules, which particularly refer to the expenditure on advertisement, it cannot be said that a very stringent rule is retained for the purpose of expenditure on advertisement or maintenance of any residential accommodation and for other sundry expenditure, no such strict compliance is asked for. A harmonious reading of the provisions aforementioned leads us to conclude that the requirements of rule 6B have to be regulated by the second proviso as shown in sub-section (3) of section 40A of the Act, which proviso shall govern not only the exceptions as enumerated under rule 6DD, but apply also in respect of any expenditure including expenditure on advertisement. This conclusion in our opinion answers in full the second question as well as the first question, for, all assessments in which deduction is made of the expenditure on advertisement, the assessee must show full compliance with the provisions in sub-section (3) of section 37 read with rule 6B, but in case it is in a position to demonstrate that it has been prevented from making payment by a crossed cheque drawn on a bank or a crossed bank draft, for the reason that the nature of the advertisement has been such that no payment could be made by a crossed cheque or a crossed bank draft or that such extent of banking facilities were not available as well as on consideration of business expediency and other relevant factors it may take the stand that it was not possible for it to make payment by a crossed cheque drawn on a bank or crossed bank draft, it will not be right for the said reason to say that the provisions of section 40A(3) alone should be applied to the assessee's case and rule 6B(3) shall not regulate the advertisement charges. It will also not be right to say that once it is found that payment has not been made by a crossed bank draft or a crossed cheque, it violates rule 6B and section 37(3). The aforementioned proviso in section 40A(3) is a rule of exception which the assessee may prove and if it has to bring its case under such exception, it must show that it was not possible to comply strictly with what is prescribed under rule 6B and the grounds are such that are covered by the aforementioned proviso in section 40A(3) of the Act. Since this aspect of the case has not been examined, our answer to the first question is that the Income-tax Officer is not correct in disallowing Rs. 2, 750 and Rs. 6, 188 being advertisement expenses. Since this aspect of the case has not been examined, our answer to the first question is that the Income-tax Officer is not correct in disallowing Rs. 2, 750 and Rs. 6, 188 being advertisement expenses. He can do so only after giving to the assessee an opportunity to satisfy that it has not been able to make payments by crossed cheques drawn on a bank or by crossed bank drafts for the amounts spent by it on advertisement because bank facilities were not available to the extent required for such payment or for the reason of the expediency of business and other relevant factors, it made payments not by crossed cheques or crossed bank drafts. It will be open to the assessing authority to take into account the nature and extent of banking facilities available, consideration of business expediency and other relevant factors and if he is of the opinion that the expenditure is genuine and correct, can hold that there has been no negligence on the part of the assessee, which would disentitle it to the benefit of the proviso aforementioned. The reference is answered accordinglyMr. N. V. Balasubramaniam, who has represented the Revenue before us, we are satisfied, has given full assistance to the extent possible and deserves payment of full hearing fee for two days' work in the court in connection with the hearing of the case. We fix each day's fee at Rs. 750.