K. Shivashankar Bhat, J.The question referred to us under the provisions of the Income Tax Act, 1961, read thus :

"(1) Whether, on the facts and in the circumstances of the case, the liability to pay surtax is an admissible deduction in computing the total income

(2) Whether, on the facts and in the circumstances of the case, the expenditure incurred on physicians samples is in the nature of advertisement expenditure falling within the restrictive provisions of section 37(3A) of the Income Tax Act, 1961 "

2. The first question has to be answered in the negative and in favour of the Revenue following the decision of this court in Commissioner of Income Tax, Karnataka Vs. International Instruments (P) Ltd.,

3. The second question requires consideration. The assessee manufactures drugs. Physicians samples were claimed as expenditure u/s 37 of the Income Tax Act, 1961 (" the", for short). This expenditure was treated as an expenditure incurred towards advertisement, publicity or sales promotion and, consequently, the restrictive clause of section 37(3A) of thewas applied resulting in disallowance of a part of the expenditure incurred by way of supplying physicians samples. According to the assessee, the expenditure claimed is not an expenditure incurred towards advertisement, publicity or sales promotion. It was an expenditure falling within section 37 itself, as an expenditure laid out or expended wholly and exclusively for the purpose of the business. The Appellate Tribunal has held that the cost of free samples supplied to physicians was by way of an expenditure for sales promotion. The drugs manufactured by the assessee are publicised through such supplies of free samples to physicians.

4. The assessee contends that the samples were given to physicians find out the reaction of the medical practitioners and the public towards the drug in question (of which samples were given) so that the manufacturer may improve upon the quality or drop further production. These samples, according to the assessee, were not for the purpose of advertisement, publicity or sales promotion.

5. Mr. Sarangan, learned counsel for the assessee, contended that the idea conveyed by the words "advertisement, publicity and sales promotion" is the idea of inducing the public to buy the commodity or the article in question. According to learned counsel, the word "advertisement" conveys the idea of propaganda and similarly the meaning of the word "publicity" should comprise an act of persuading the public to buy the commodity or a manufactured article. When samples are given free to medical practitioners, there is no inducement to the public to buy those drugs. The drugs are not sold to the medical practitioners to at all. These samples may be used by the medical practitioners to treat their patients and if they find the drugs useful and beneficial, they may prescribe them thereafter. The assessee according to learned counsel, collects information from the medical practitioners about the curative value of the drugs and their usefulness in treatment so that further research could be carried out either to improve the same or to produce fresh and new drugs.

6. The substance of the contention on behalf of the assessee is that the three words referred to above should result in a propaganda for the drugs in question through the media of newspapers, T. V., posters and like modes of publicity. The concept of sales promotion is in no way wider than the aforesaid concept of publicity and advertisement whereby the public is persuaded to buy the commodity in question. Learned counsel referred to several decisions involving the application of the doctrine of noscitur a sociis. The principle is stated at page 289 of Maxwell on the interpretation of Statutes (12th Edition) :

"Where two or more words which are susceptible of analogous meaning are coupled together, noscitur a sociis. They are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general."

7. The decision of the Supreme Court in Rainbow Steels Ltd. Muzaffarnagar and Birla Cotton Spinning and Weaving Mills Ltd., Delhi Vs. C.S.T., U.P. and State of U.P., was also pressed into service. A few more decisions were also cited to impress upon the court that the above three words should have a similar meaning and that they are to be understood in their cognate sense and that the a Appellate Tribunal attributed a wider meaning to the phrase "sales promotion" erroneously.

8. We do not think that we should discuss the principle pertaining to the interpretation of statures referred to above in detail because the idea behind the contention is to convey that advertisement, publicity or sales promotion should be confined to the act of media propaganda and a direct approach to the consumers by publicising the product through newspaper advertisements, posters or some other similar methods. We do not think that such a limited meaning should be given to the three words. The nature of the advertisement or publicity depends upon the nature and quality of the article in question. An inducement to the public to buy a particular commodity may be formulated in a mode most suitable to the article in question.

9. The members of the public would not buy a drug just because it is advertised repeatedly or publicised through posters or announced on T. V., etc. The members of the public should have confidence about the curative value of the drug and such confidence could be created mainly by the medical practitioners prescribing the said drug or when the medical practitioners give the same to patients towards treatment. The media through which the drug could get publicised and earn goodwill will be the media of prescription by the medical practitioner. Further, the real persons who could create a market for a particular drug are the medical practitioners themselves having regard to the nature of the drug when compared to other industrial products. A drug is not an ordinary article of consumption. It is consumed only to get rid of some ailment. Before the drug gets circulated, its reputation will have to be confirmed to the medical practitioners and that is why free samples are supplied to them.

10. If the object of supplying free samples is only to find out the reaction of the medical practitioners about the efficacy or curative value of the drug, the supply of free samples would have been confined during the initial stages of production of a new drug. However, that is not the case of the assessee here. The assessee nowhere contends that free samples were given to the medical practitioners only at the time when a drug is introduced for the first time.

11. Learned counsel for the Revenue also pointed out that the assessee in its original return of income has included these sums under the head "Advertisement, publicity and sales promotion". Therefore, the assessees first impression about the nature of the free samples was the correct approach and the assessee has properly disclosed the same under an appropriate head in the return. Subsequently, the assessee sent a letter modifying the original return of income and offered to confine the claim under this head to a part of the expenditure.

12. Learned counsel for the Revenue is justified in pointing out the above circumstance as an additional factor in support of the conclusion arrived at by the Appellate Tribunal.

13. Each of the three words "advertisement, publicity and sales promotion" cannot always be confined to different concepts. Some aspects of one word would naturally overlap with the meaning attributed to the other word. No doubt, in a commercial sense, the purpose of these activities is to gain goodwill and a market but the mode of achieving this object cannot be confined to the limited meaning attributed to them by learned counsel for the assessee.

14. For the reasons stated above, the second question referred to us is answered in the affirmative and against the assessee.

15. Reference is answered accordingly.