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TMI Blog1984 (1) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ories at Tamil Nadu and Adoni in Karnataka. It has also some residential flats at Bombay where its directors and employees used to stay while on business tour in that city. When the expenditure of Rs. 37,088 for the maintenance of these flats was claimed as a deduction, the ITO invoked section 37(4) of the Income-tax Act, 1961 (' the Act ') and held that it is an expenditure on the maintenance of a guest house which has only to be disallowed under that sub-section. This question in the assessee's own case had come up before the Tribunal for the assessment years 1973-74 and 1974-75. There the Tribunal held that it is not a guest house and allowed the expenditure. So, the Commissioner (Appeals) for this year following those Tribunal's orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndition, if any, as may be prescribed. Then rule 6C of the Income-tax Rules, 1962, was prescribed to provide for the maintenance of certain registers. Only if those registers were maintained, the assessee can claim the deduction. After the enactment of section 37(4) by the Finance Act, 1970, with effect from 1-4-1970, the position changed. Thereafter, no expenditure at all will be allowed on the maintenance of a residential accommodation in the nature of guest house which for brevity is called a guest house. So, the question raised by the assessee for these years is that the flats at Bombay are not guest houses. In CIT v. Aruna Sugars Ltd. [1980] 123 ITR 619 (Mad.), it has been held that unless the guest house is intended for use by a compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who frequent it more than the employees and that is what the Parliament took note of and that is what the Parliament wanted to curb and prevent and that, therefore, the intention required by the two judgments cited to make it a guest house is manifest in the case, and that the mischief sought to be avoided should not be perpetuated. We find it difficult to agree. So far as we know, no assessee used to maintain, residential accommodation wholly and exclusively for the use of others. What they used to do was to maintain residential accommodation for the ostensible business purpose and then use it for the comfort of others. It was this abuse that the Parliament wanted to curb. But the term ' guest house ' which was the expression used to denot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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