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TMI Blog1989 (4) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... urn for the assessment year 1974-75 and therein claimed expenses of Rs. 16,745 for providing lunch and other refreshments to its directors and other persons during meetings. On scrutiny, the Income-tax Officer found that most of the items pertained to tea and lunch served on different occasions which, according to him, were expenses on entertainment. He further found that some expenses were not connected with the business of the assessee. He disallowed Rs. 10,000 on an estimate basis. On appeal, the Appellate Assistant Commissioner came to the conclusion that the expenditure to the tune of Rs. 2,055 could be said to be spent on entertainment or refreshment/lunch to customers/loanees. Out of Rs. 10,000, he disallowed the addition of Rs. 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dur Chand [1981] 131 ITR 336 and it was held that such expenses could not be allowed under section 37(1) of the Act, and were covered by section 37(2A) of the Act. In taking this view, this court dissented from the view taken by the Gujarat High Court in CIT v. Patel Brothers and Co. Ltd. [1977] 106 ITR 424. On behalf of the assessee, learned counsel has cited Maharaja Shree Umaid Mills Ltd. (No. 1) v. CIT [1989] 175 ITR 70 (Raj) and CIT v. Agarpara Co. Ltd. [1987] 167 ITR 866. In these cases, the view of the Gujarat High Court in Patel Brothers' case [1977] 106 ITR 424 has been followed. Since the Full Bench decision is binding, we are of the opinion that the expenses incurred by the assessee on the refreshment of its customers or its dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as the company cannot act in its own person but has only to act through directors who qua the company have the relationship of an agent to its capacity." In this case, no material was placed on record to show that the directors-cum-employees attended the meetings not as directors but as employees. To limit the expenditure for such matters, sub-section (2A) was enacted placing a ceiling on the expenditure to be allowed. Accordingly, we are of the opinion that none of the three statutory authorities considered the facts of the case on the basis of the correct legal position and we answer the referred question in favour of the Revenue in the affirmative, to the effect that the expenses incurred for providing refreshment at the meetings of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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