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Rule 6B of Income Tax Rules 1962: Expenditure on Advertisement

Rule 6B - Expenditure on Advertisement

(1) The allowance in respect of expenditure on advertisement shall not in the following cases exceed—
(a) in respect of articles intended for presentation,—
(i) where the amount of such expenditure does not exceed Rs. 1,000 on each such article, the whole of such amount ;
(ii) in any other case, Rs. 1,000 on each such article as increased by a sum equal to fifty per cent of the expenditure in excess of Rs. 1,000 on such article ;
(b) 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 the foreign exchange for the time being in force.

(2) (i) Where the Assessing Officer is of opinion that any expenditure on advertisement of the nature described in clause (ii) is excessive or unreasonable having regard to the legitimate business needs of the assessee and the benefit derived by or accruing to him therefrom, that portion of the expenditure which is so considered by him to be excessive or unreasonable shall not be allowed as a deduction in computing the total income.

(ii) The expenditure referred to in clause (i) is that incurred on advertisement involving payment—
(A) to a person (including in the case of a company, firm, an association of persons or a Hindu undivided family, a director, partner or member, as the case may be, of such company, firm, association or family) who has a substantial interest in the business of the assessee, or to a relative of such person ; or
(B) to a person who carries on the business of, or profession as, a publicity or advertising agent, where the assessee, or in a case where the assessee is a company, firm, an association of persons or a Hindu undivided family, any director, partner or member, as the case may be, of such company, firm, association or family, or any relative of such assessee or such director, partner or member, has a substantial interest in the business or profession of that person.
(3) Any expenditure on advertisement for which payment has been made in a sum exceeding Rs. 10,000 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 :

Provided that where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for expenditure on advertisement exceeding Rs. 10,000 and subsequently during any previous year the assessee makes payment in respect thereof otherwise than in accordance with the provisions of this clause, the allowance originally made shall be deemed to have been wrongly made and the Assessing Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment ; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the previous year in which the payment was so made.

Explanation : For the purposes of this rule,—

(i) “relative” shall have the meaning assigned to it in clause (41) of section 2;
(ii) a person shall be deemed to have a substantial interest in a business or profession, if—
(a) in a case where a business or profession is carried on by a company, such person is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits, carrying not less than twenty per cent of the voting power ; and
(b) in any other case, such person is beneficially entitled to not less than twenty per cent of the profits of such business or profession.’




Extra Notes for Readers:

- Rule 6B was omitted by the Income Tax (Thirty Second Amendment) Rules, 1999, w.e.f. 19-11-1999


Reference/Source: Check at Income Tax site for latest version of the Rules - link

This page was last updated on 17th October 2016.
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