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Issues:
1. Classification of income derived from letting out part of a factory building under the head 'Income from house property' or 'Income from other sources'. 2. Allowance of entertainment expenditure incurred by the assessee for tea and messing expenses under section 37(2B) of the Income-tax Act, 1961. Issue 1: Classification of Income: The High Court of Gujarat addressed the issue of whether income derived from letting out part of a factory building should be classified under 'Income from house property' or 'Income from other sources'. The Income-tax Appellate Tribunal had previously held that such income should be assessed under 'Income from house property'. The court referred to a previous judgment involving New India Industries Limited where a similar issue was decided in favor of the Revenue. However, in the present case, the court ruled in favor of the assessee, following its previous decision, and classified the income under 'Income from house property' for the relevant assessment years. Issue 2: Allowance of Entertainment Expenditure: The second issue revolved around the allowance of entertainment expenditure incurred by the assessee for tea and messing expenses under section 37(2B) of the Income-tax Act, 1961. The Income-tax Officer disallowed the deduction of these expenses, which was upheld by the Appellate Assistant Commissioner. However, the Tribunal, considering the nature and magnitude of the business, and following a decision of the High Court, held that the expenses were not lavish, extravagant, or unreasonable. The Tribunal concluded that the expenses were incurred due to a long-standing practice or trade custom and were not entertainment expenses under section 37(2B). Consequently, the court agreed with the Tribunal's decision and ruled in favor of the assessee, allowing the deduction of the tea and messing expenses for the assessment years 1971-72 and 1972-73. ---
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