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TMI Blog2005 (3) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal is not corredt that the sum of Rs. 35,226 shown as sales expenditure was not entertainment expenditure so as to be hit by the provisions of section 37(2A) read with Explanation 2 to the said section - the question referred to the court is answered partly in the affirmative and partly in the negative, i.e., the Tribunal was right in law in deleting the addition by way of disallowance of Rs. 16,121 on account of presentation articles, but the Tribunal was not correct in deleting the addition by way of disallowance amounting to Rs. 35,226 on account of sales expenses X X X X Extracts X X X X X X X X Extracts X X X X ..... ) who for the reasons stated in his order dated February 23, 1988 confirmed the disallowance. The assessee carried the matter in second appeal before the Tribunal who for the reasons stated in its order dated August 29,1992 allowed the appeal by holding as follows: "On carefully going through the records and hearing both the parties, we are of the opinion that these expenditure are incurred in the course of business for the best interest of business and expended wholly and exclusively for the purpose of business. As we noted earlier all entertainment may imply hospitality but all hospitality under all circumstances cannot be considered as entertainment. Taking into consideration the total turnover the expenditure claimed by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [1977] 107 ITR 133 (Guj); (2) CIT v. Dascroi Taluka Co-operative Purchase and Sales Union Ltd. [1980] 126 ITR 413 (Guj); and (3) Karjan Co-operative Cotton Sales Ginning and Pressing Society v. CIT [1993] 199 ITR 17 (Guj) [FB]. Section 37(2A) of the Act opens with non obstante clause whereby it is laid down that no allowance shall be made in respect of so much of the expenditure in the nature of entertainment expenditure incurred by any assessee during any previous year which expires after the 30th day of September, 1967, except to the extent of specified limit laid down in the section. Therefore, any expenditure which is otherwise allowable under section 37(1) or 37(2) of the Act, would be hit by the provisions of section 37(2A) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly and not expansively. Ordinarily, 'entertainment' connotes something which may be beneficial for mental or physical well being but is not essential or indispensable for human existence. A bare necessity, like an ordinary meal, is essential or indispensable and, therefore, is not 'entertainment'. If such a bare necessity is offered by another; it is hospitality but not entertainment. Unless the definition of 'entertainment' includes hospitality, the ordinary meaning of 'entertainment' cannot include hospitality. For this reason, the expenditure incurred in extending customary hospitality by offering ordinary meals as a bare necessity, is not 'entertainment expenditure' without the aid of the enlarged meaning given to the words by Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainment" or "hospitality". If that be so, the expenditure in question cannot be termed to be either entertainment expenditure or in the nature of entertainment expenditure. Therefore, the conclusion of the Tribunal that the said item of expenditure, viz., Rs. 16,121 cannot be termed to be entertainment expenditure is correct though for the reasons stated hereinbefore. The other sum of Rs. 35,226 described as sales expenditure is: on the application of the above tests an item of expenditure which would fall within the meaning of the term entertainment expenditure, as the said expenditure had been incurred for extending hospitality to various persons as detailed in the assessment order, viz., guests of the company. The Tribunal was therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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