Circular No. 200 — Section 37(3) l Expenditure on Advertisement/ Maintenance of Guest House/travelling

What this is

Circular No. 200 was issued by the Central Board of Direct Taxes on 28 June 1976. Its subject is Section 37(3) l Expenditure on Advertisement/ Maintenance of Guest House/travelling.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Puts advertisement in a souvenir on the same footing as any other advertisement. Officers had been disallowing part of such expenditure on the footing that it is really a donation, and it was represented that the spend is made wholly and exclusively for the business and is allowable under section 37(1). Re-examining the question, and referring to Circular No. 19 dated 13 June 1969, the Board clarifies that no distinction need be drawn between advertisement in souvenirs and other kinds of advertisement, and that such a claim may be allowed where the conditions of rule 6B are satisfied and there is evidence that the expenditure was in fact incurred.

Why it was issued

The partial disallowances were causing hardship to assessees and avoidable litigation, and representations were made to the Board.

Who it reaches

Businesses advertising in souvenirs and commemorative publications
Assessing Officers treating such spending as a donation
Organisations selling souvenir advertisement space

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.37	s.34

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 37(3) l EXPENDITURE ON ADVERTISEMENT/ MAINTENANCE OF GUEST HOUSE/TRAVELLING
Expenditure on advertisement in souvenirs - Allowance thereof as admissible deduction
1. Attention is invited to Board’s Circular No. 19 [F. No. 9/20/69-IT(A-II)], dated 13-6-1969 [Clarification 3] on the above subject.
2. It has been represented to the Board that expenditure on advertisements in souvenirs is expenditure incurred wholly and exclusively for the purpose of business and as such is allowable as a deduction under section 37(1). Disallowance of a part of expenditure on advertisement in souvenirs by the Income-tax Officer on the ground that it is in the nature of donation has caused hardship to the assessees and has caused avoidable litigation.
3. The Board has re-examined the question in the light of the representations made. It is clarified that no distinction need be drawn between expenditure on advertisements in souvenirs and other types of advertisements. Claims in respect of expenditure on advertisements in souvenirs may be allowed if the conditions laid down in rule 6B of the Income-tax Rules are fulfilled and there is evidence that the expenditure has been incurred.
Circular : No. 200 [F. No. 204/29/76-IT(A-II)], dated 28-6-1976.

What to watch

The claim still has to satisfy rule 6B, which is not dispensed with; the circular removes only the donation objection.
Evidence that the expenditure was incurred has to be on the file, so the advertisement itself and the bill matter.
The clarification does not turn on who publishes the souvenir; it turns on the expenditure being advertisement expenditure.
It construes section 37 and rule 6B as they then stood, the restriction on advertisement expenditure being the setting the circular's own heading records.

Where you meet it

In a scrutiny assessment where souvenir advertisement spending is disallowed in part as being in the nature of a donation.

What it names

Rules it names. Rule 6B of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 38/2025 [F. No 370142/11/2025-TPL] / SO 1838(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 23 April 2025
Circular No. 05/2012 — Inadmissibility of expenses incurred in providing freebees to Medical Practitioner by pharmaceutical and allied health s 1 August 2012
Circular No. 727 — 372. Instructions regarding extent of expenditure incurred on food or beverages provided to employees by employers to be 27 October 1995
Circular No. 708 — 372. Instructions regarding extent of expenditure incurred on food or beverages provided to employees by employers to be 18 July 1995
Circular No. 671 — 368. Whether, where deposit made by an assessee for obtaining new telephone connection under ‘Tatkal Telephone Deposit S 27 October 1993
Circular No. 644 — 371. Whether provision of food or beverages in places other than place of work in respect of low-paid employees can be t 15 March 1993

← Circular No. 202 · Circular No. 198 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.