2010 (4) TMI 291 - HC - Income Tax

Entertainment expenditure deduction u/s 37(2)(A) payment of rent to PSICC deduction u/s 30 Held that - payment of rent to IPCC can not be allowed u/s 30 expenditure liable to be disallowed u/s 37(2)(A) regarding deduction of entertainment expenditure 50% of expenses were allowed under Section 37(2A) by the ITAT that which portion of the miscellaneous expenses claimed by an assessee is deductible as entertainment expenses of the assessee is a matter to be decided by the fact finding authority on the basis of material placed before them decision of ITAT is not wrong.

Summary

Issues:
1. Disallowance of expenditure on articles without logo for business promotion.
2. Allowability of rent paid to PSICC under Section 30.
3. Deductibility of 50% entertainment expenses under Section 37(2)(A).

Analysis:

Issue 1: Disallowance of Expenditure on Articles
The appellant-revenue challenged the ITAT's decision regarding the disallowance of expenditure on articles without the assessee's logo for business promotion. The Court, after considering the minimal tax effect involved and following a previous Full Bench decision, refrained from interfering in the Tribunal's order. The Court cited a previous case and decided not to intervene in the matter, thereby upholding the Tribunal's decision on this issue.

Issue 2: Allowability of Rent Paid to PSICC
The Court addressed the question of whether the rent paid to PSICC was allowable under Section 30 of the Income Tax Act, 1961. The counsel for the assessee conceded that a similar issue had been decided against the assessee by the Supreme Court in a previous case. Following the Supreme Court's decision and maintaining consistency with a previous judgment, the Court ruled in favor of the appellant-revenue and against the respondent-assessee on this issue.

Issue 3: Deductibility of 50% Entertainment Expenses
Regarding the deduction of 50% of entertainment expenses, the Tribunal had allowed the deduction based on the explanation to Section 37(2A). The Court examined the relevant provisions and upheld the Tribunal's decision, citing a Supreme Court ruling that fact-finding authorities' decisions should not be interfered with unless there are substantial grounds to do so. As the Tribunal and CIT(A) had made concurrent findings, the Court upheld the decision to allow 50% of the expenses as deductible, ruling in favor of the respondent-assessee and against the appellant-revenue on this issue.

In conclusion, the Court disposed of the appeal based on the above analysis and rulings, maintaining consistency with previous judgments and legal provisions.

*(M.M. KUMAR) JUDGE*
*(JITENDRA CHAUHAN) JUDGE*
*April 26, 2010*