1991 (4) TMI 120 - HC - Income Tax

Summary

Issues involved: Interpretation of section 37(2A) of the Income-tax Act regarding the deductibility of entertainment, seminar, and conference expenses.

In this judgment, the petitioner sought a reference on whether the Income-tax Appellate Tribunal was correct in holding that 35% of the expenditure on entertainment, seminar, and conference expenses was not subject to section 37(2A) of the Income-tax Act. The Commissioner of Income-tax disallowed the expenditure on the basis that it was not incurred on the factory premises but in hotels. However, the Tribunal found that the expenditure on food and beverages for employees, when incurred in the course of official duties, is excluded from section 37(2A) as per Explanation 2. The Tribunal estimated that 35% of the expense was on the food of employees, which was considered reasonable. The judgment emphasized that expenses incurred on employees' food during official duties are excluded from section 37(2A) and are considered part of their work and duty to entertain company customers. The decision was based on factual findings and the interpretation of the law.

The judgment concluded that the determination of the percentage of expenses related to employees' food was a question of fact and self-evident in the context of the law. The Tribunal's decision was upheld, and the petitioner's request for reference was dismissed.