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Issues Involved:
1. Whether the expenses incurred by the assessees are in the nature of entertainment expenditure u/s 37(2A) of the Income-tax Act, 1961. 2. Whether the High Court has the power to rectify, modify, or review its judgment under sections 151 and 152 of the Code of Civil Procedure after answering a reference u/s 256 of the Income-tax Act, 1961. Summary: Issue 1: Nature of Entertainment Expenditure - M/s. Globe Transport Corporation: The Income-tax Officer disallowed Rs. 15,000 as entertainment expenses. The Commissioner of Income-tax (Appeals) reduced this to Rs. 10,000. The Tribunal held that expenses on tea, cigarettes, etc., were incidental to business and not entertainment. The High Court affirmed this view, stating these expenses are allowable as business expenditure u/s 37(2B) of the Income-tax Act, 1961. - M/s. Shambhu Dayal Rani Pal: The Income-tax Officer disallowed Rs. 9,900 as entertainment expenses. The Appellate Assistant Commissioner allowed the deduction, stating these were customary business expenses. The Tribunal upheld this decision. The High Court affirmed that such expenses are not entertainment expenditure u/s 37(2B). - M/s. Rameshwar Dayal and Co.: The Income-tax Officer disallowed Rs. 15,009 as entertainment expenses. The Commissioner of Income-tax (Appeals) upheld this disallowance. The Tribunal allowed the deduction, stating these were customary business expenses. The High Court affirmed that these expenses do not constitute entertainment expenditure u/s 37(2B). Issue 2: Power to Rectify, Modify, or Review Judgment - The Commissioner of Income-tax filed applications u/s 151 and 152 of the Code of Civil Procedure to rectify/modify/review the High Court's orders, arguing that the provisions of section 37(2A) with Explanation 2 were not considered. The High Court held that it does not have the power to rectify or review its judgment under sections 151 or 152 of the Code of Civil Procedure after answering a reference u/s 256 of the Income-tax Act, 1961. - The High Court emphasized that the power of review is not inherent and must be conferred by statute. The High Court, exercising powers under sections 256 and 258 to 260 of the Income-tax Act, is not included among the "income-tax authorities" referred to in section 116 of the Act and thus cannot exercise the power of rectification u/s 154 of the Act. - The High Court referred to various precedents, including decisions from the Privy Council, Nagpur High Court, Allahabad High Court, and Calcutta High Court, which consistently held that no review lies in such cases. The High Court concluded that the applications for rectification/modification or review do not lie and dismissed them. Conclusion: The High Court dismissed the applications for rectification/modification or review of its orders, holding that it lacks the power to do so under sections 151 and 152 of the Code of Civil Procedure after answering a reference u/s 256 of the Income-tax Act, 1961. The expenses in question were affirmed as allowable business expenditures and not entertainment expenditures u/s 37(2B) of the Income-tax Act, 1961.
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