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TMI Blog1995 (9) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... the company which was a place necessary for stay and could not be termed guest house within the meaning of s. 37(4) of the Act ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the expenditure of ₹ 66,248 incurred by the assessee for its guest house ? 2. The questions relate to the allowability of ₹ 62,248 the expenses incurred by the assessee for maintaining residential accommodation. The ITO disallowed the claim without examining whether the expenses were allowable under s. 37(1) or not with reference to the provisions of s. 37(4) of the Act though in his order he observed that it is a settled principle that if the questions of allowability or otherwise or any busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or boarding and lodging to any person (including any employee or, where the assessee is a company, also any director of, or the holder of any other office in, the company) on tour or visit to the place at which such accommodation is situated, is accommodation in the nature of a guest house within the meaning of sub-s. (4)." Sub-s. (5) has been inserted by Finance Act, 1983, with retrospective effect, but retrospectivity has been restricted to 1st April, 1979. Hence, the provision cannot be read and pressed into service for any period of assessment prior to 1st April, 1979. 4. In this regard we may refer to a recent decision of the Supreme Court in the case of CIT vs. Patel Bros. & Co. Ltd. & Ors. (1995) 126 CTR (SC) 132: (1995) 215 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur cannot be considered as guest house for the purpose of sub-s. (4) of s. 37. The word 'guest house' in its ordinary sense is suggestive of any accommodation maintained for extending hospitality to a 'guest' or an outside visitor and not providing shelter and/or food to inhouse persons for the purpose of business itself. Employees of a business house cannot be considered a guest of the business. As the scheme suggests that in order to consider any accommodation by the assessee as guest house an element of extending, some extra additional hospitality other than to meet obligatory necessity is essential to meet the requirement of business. The second proviso to sub-s. (4) to above is also suggestive of the fact that an accomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37(4). We are fortified in our aforesaid conclusion by a decision of the Madras High Court in the case of CIT vs. Aruna Sugars Ltd. (1980) 123 ITR 619(Mad) : TC 17R.1462 wherein Their Lordships while considering the meaning of 'guest house' came to the conclusion that where an accommodation is maintained either in the principal or in a place where the factory is located for the directors and other employees of the assessee-company who have to visit it for the purpose of company's business, any expenditure incurred for the maintenance of such accommodation cannot be brought within the scope of s. 37(3) of the IT Act, 1961. We accordingly answer the first question referred to above in the affirmative i.e. in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36 or not and whether such expenditure is laid out or expended wholly and exclusively for the purposes of business or profession. Here we may cite a decision of the Gujarat High Court in the case of CIT vs. Ahmedabad Mfg. & Calico Printing Co. Ltd. (1990) 89 CTR (Bom) 38: (1990) 197 ITR 538(Guj) : TC 17R.1477 which lays down that : "The assessee was, admittedly, a tenant of the premises described as residential accommodation in the nature of guest house and employees of the assessee stayed there for temporary periods. The assessee would be entitled to deduction of rent paid by him for such premises under sub-cl. (i) of cl. (a) of s. 30. It would also be entitled to deduction of the cost of repairs to such premises. It was the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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