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TMI Blog2014 (8) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... heir work” as contemplated in the Explanation – Decided against Revenue. - Income Tax Reference No. 149 of 1996 - - - Dated:- 31-7-2014 - S. C. Dharmadhikari And B. P. Colabawalla,JJ. For the Applicant : Mr. J. D. Mistry, Senior Advocate i/b M/s. Ramesh Makhija and Co. For the Respondent : Mr. Vimal Gupta, Senior Advocate i/b Mr. Vipul Bajpayee JUDGMENT [ Per B. P. Colabawalla, J ] 1. By this Income Tax Reference under Section 256(1) of the Income Tax Act, 1961 (for short Act), the Income Tax Appellate Tribunal (hereinafter referred to as Tribunal ), has referred the following questions of law for a decision of this Court and which read as under:- 2. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the assessee was not entitled to deduction of interest of ₹ 94,029/-, 186572, 186516/-,1,87,140/- 3,33,997/-, 3,57,684/- paid on the fixed deposits under Section 80V of the Act in computing its total income? 3. Whether on the facts and in the circumstances of the case, the Tribunal ought to have held that the interest of ₹ 94,029/- ₹ 1,86,572/-, 1,86,516/- 1,87,140/- ₹ 3,33,997/-, & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,95,188/- 1,76,218/-, ₹ 2,61,115/-, 2,96,646/-, ₹ 3,60,871/-, ₹ 3,93,028/- were not allowable as a deduction? 15. Whether on the facts and in the circumstances of the case, the Tribunal ought to have held that the sales promotion expenses were allowable as a deduction in computing the assessee's income? 16. Whether the Tribunal ought to have held that the place where the customers were provided with refreshments would be other place or work of the employees and that therefore such expenditure relating to the employees would not be entertainment expenditure within the meaning of Explanation 2 to Section 37(2A)? 17. Whether the Tribunal failed to appreciate that during the course of business discussions the place where refreshments are provided become other place of work of the employees within the meaning of Explanation 2 to Section 37(2A)? 18. Whether the Tribunal was justified in distinguishing its own decision in Antifriction Bearing Corporation's case on the ground that Explanation 2 to Section 37(2A) was not considered when it is apparent on a proper reading of the said order that the Tribunal had borne in mind the said Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of interest calculated @ 15% disallowable u/s 40A(8) of the Act. This could not have been done by the assessee had it not been aware of the fact that the loans wee not raised for the purpose of payment of taxes. Only after as we have stated earlier this claim was made only after the matter was raised in the case of Bakelite Hylam Ltd (supra). It has been rightly pointed out by the authorities below that in all these years the assessee had enough profits for each year to pay the taxes due from it. It is not the case of the assessee that all the bank accounts it has was all along a overdraft account as in the case of Bakelite Hylam Ltd (supra) earlier. In such an event we do not think that it would be possible to draw any inference that moneys were drawn by the company for payment of taxes from out of the deposits and loans raised by it and deposited in any of its accounts which had overdraft facilities. In this view of the matter, we agree with the D. R. that the prayer for setting aside the matter to the A. O. for fresh examination is of no practical use and would mean giving a second innings to the assessee, especially in view of the fact that it was never the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos.2 to 10 in favour of the Revenue and against the Assessee. 6. As far as Question Nos.14 to 19 are concerned, they were dealt with by the Tribunal in paragraph Nos.12 to 14 of its appellate order, wherein the Tribunal Held:- 12. Ground No.5 relates to disallowance of alleged sales promotion expenses. The facts relating to all the assessment years are similar and it is sufficient to quote the same for the a. y. 77-78 from the order of the IAC(Asstt): The assessee has shown sales promotion expenditure of ₹ 1,95,188/-. It appears from the records that this constitute entertainment partly customary and partly lavish. No broad break up has been given either about the nature or about the employee welfare expenses embedded in it. The decision of the Tribunal for the earlier years on this point has become the subject mater of reference. The amount of ₹ 1,95,188/- is disallowed as not pertaining to sales promotion expenses allowable under the Act. 13. On appeal the CIT(A) declined to interfere with the order of the IAC (Asstt) in view of the provisions of sub.sec.32(2A) of the Act. 14. The authorized representative for the assessee contended that these expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2B), as it stood before the 1st day of April, 1977, entertainment expenditure includes expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work. (emphasis supplied) 9. Mr. Mistry laid stress on the words or other place of their work and contended that this necessarily meant a place of work other than the Assessee's office or factory and could certainly include a hotel. He submitted that in the present case, the expenses were incurred for hosting dinner and lunches for the customers of the Assessee in the hotel and that an equal number of the employees of the Assessee Company also accompanied the said customers. He, therefore, submitted that 50% of such expenses ought to have been allowed as they were not related to entertainment expenditure. 10. In our view, Mr. Mistry is only partly co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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