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TMI Blog1989 (12) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of section 37(2A) of the Income-tax Act and in that view in deleting the disallowance made by the Income-tax Officer. 2. Whether, on the facts and in the circumstances of the case and having regard to the fact that since the acquisition of the shares of Singapur Jute Accessories (P.) Ltd. in 1968 the aforesaid shares were shown in the assessee's balance sheet as its investment, the Tribunal was justified in law in holding that the loss of the aforesaid shares in 1977 should be treated as revenue loss instead of capital loss as held by the Income-tax Officer? 2. This reference relates to the assessment years 1977-78 and 1978-79 for which the corresponding accounting period ended on 31-12-1976 and 31-12-1977, respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troversy that has arisen as to whether the usual hospitality extended by businessmen to his customers will come within the ambit of the expression entertainment expenditure. Explanation 2 of section 37 is in the following terms: Explanation 2 : For the removal of doubts, it is hereby declared that for the purposes of this sub-section and 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee that the expenses were not in the nature of hospitality at all. It was more in the nature of a customary gift given at the time of Dewali to foster goodwill and sales promotion. The AAC has accepted this interpretation of the assessee. The order of the AAC has been upheld by the Tribunal. 9. We do not see any legal infirmity in the findings of the Tribunal. The customary Dewali gift, Dewali Bohni or Dewali Baksis given during Dewali cannot be brought within the ambit of Explanation 2of section 37. 10. Question No. 2 relates to the nature of losses incurred for sale of shares in 1977. The facts relating to this question have been stated by the AAC in the following words: The assessee had received the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery of the value of the shares. Viewed thus, we would hold that the Commissioner of Income-tax (Appeals) was justified in treating the amount of ₹ 50,000 as revenue loss and thereby deleting the addition of ₹ 50,000 made by the Income-tax Officer. 11. We are of the view that the Tribunal has taken a correct view of the matter. The shares were received as consideration for the services rendered under a technical collaboration agreement. Such receipt must be on revenue account. That it was shown in the balance sheet as investment does not mean that the assessee had acquired shares on capital account. The assessee was not a dealer in shares and the shares could not have been shown as stocks-in-trade of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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