1981 (6) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Whether expenses incurred on messing and tea are entertainment expenses disallowable u/s 37(2B) of the Income-tax Act, 1961.
2. Whether the Income-tax Appellate Tribunal was justified in not entertaining additional grounds raised by the Revenue.
3. Whether the Tribunal was justified in holding that no adequate ground was brought out to condone the delay in filing the additional grounds.

Summary:

Issue 1: Messing and Tea Expenses as Entertainment Expenses
The first question is directly covered by the decision in CIT v. Patel Brothers & Co. [1977] 106 ITR 424. Following this precedent, the court answered in the affirmative and against the Revenue, holding that the expenses incurred on messing and tea are not in the nature of entertainment expenses disallowable u/s 37(2B) of the Income-tax Act, 1961.

Issue 2: Entertaining Additional Grounds by the Revenue
The facts relevant to this issue involve the assessee-firm, a registered partnership, which had its interest payments to partners disallowed by the ITO without adjusting the interest paid by the partners to the firm. The AAC allowed the assessee-firm's claims, including the adjustment of interest and deduction of messing and tea expenses. The Revenue appealed only against the messing and tea expenses but later sought to raise additional grounds regarding the interest adjustment after the appeal period had lapsed. The Tribunal refused to entertain these additional grounds, stating that they constituted a new appeal and were time-barred without sufficient grounds for condonation of delay.

Issue 3: Condonation of Delay in Filing Additional Grounds
The Tribunal found that the Revenue did not provide sufficient grounds to condone the delay in raising additional grounds. The Tribunal noted that the circular from the CBDT, which the Revenue cited as the reason for the additional grounds, was issued more than a month before the appeal was filed, and no material was presented to show that the ITO was unaware of the circular before filing the appeal. The Tribunal's discretion in this matter was upheld, and the court agreed that no adequate grounds were made out to condone the delay.

Conclusion:
All questions were answered in the affirmative and against the Revenue, with no order as to costs.