1976 (8) TMI 59 - AT - Income Tax

Summary

Issues: Appeal against reduction of disallowance under s.37(2B) of the Income-tax Act 1961.

The judgment pertains to an appeal by the revenue against the reduction of disallowance made by the Income-tax Officer under s.37(2B) of the Income-tax Act 1961. The assessee, a commission agent in fresh fruits, claimed Rs. 7,500 as "Beopari expenses" spent on running a Mess for the beoparies. The Income-tax Officer disallowed the entire claim treating it as entertainment expenses. The Appellate Assistant Commissioner allowed part of the claim, reducing the disallowance to Rs. 2,500, finding the expenses incidental to the business but excessive. The revenue appealed against the relief of Rs. 5,000 allowed by the Appellate Assistant Commissioner (Para. 1-3).

On behalf of the revenue, it was argued that s.37(2B) prohibits the allowance of any entertainment expenses, citing relevant case laws. The assessee, on the other hand, relied on the decision of the Appellate Assistant Commissioner and other case laws to support their claim (Para. 4-5).

The Tribunal considered the submissions and noted that expenses can only be disallowed under s.37(2B) if they are entertainment expenses. In this case, the expenses were incurred in providing meals to constituents, not for entertainment. The Tribunal referred to relevant case laws to support this conclusion and upheld the Appellate Assistant Commissioner's decision to allow Rs. 5,000 of the claimed expenses (Para. 6).

The Tribunal distinguished the cases cited by the revenue, highlighting the differences in nature of expenses and factual circumstances. Ultimately, the Tribunal dismissed the appeal, affirming the decision to allow Rs. 5,000 of the claimed expenses (Para. 7-8).