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TMI Blog1986 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly disallowed under section 37(2B) of the Income-tax Act, 1961, as being in the nature of entertainment expenditure?" In order to appreciate the question referred to us, it is necessary to notice the facts as found by the Tribunal. The assessee, a private limited company incorporated under the Companies Act, is, inter alia, engaged in the business of undertaking "Fumigation and Disinfection ". For the assessment year 1975-76 relevant to the accounting year ending on March 31, 1975, the assessee before the Income-tax Officer, Company Circle I, Bangalore, inter alia, claimed a sum of Rs. 26,119 as "Business Promotion Expenses" allowable under section 37(1) of the Act. But, the Income-tax Officer in completing the assessment on Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the Punjab and Haryana High Court in CIT v. Khem Chand Bahadur Chand [1981] 131 ITR 336. Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, appearing for the Revenue, contends that the Tribunal had correctly applied the legal principles and recorded a correct finding on the nature of the expenditure incurred by the assessee. In support of his contention, Sri Srinivasan relies on a Division Bench ruling of the High Court of Bombay in ACC-Vickers Babcock Ltd. v. CIT [1976] 103 ITR 321 and a Full Bench ruling of the Kerala High Court in CIT v. Veeriah Reddiar [1977] 106 ITR 610. As noticed earlier, the Tribunal had examined the very same question in relation to the very same assessee on similar facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses' which are mostly described as 'entertainment' in the entries themselves are expenditure in the nature of entertainment expenditure. Expenditure on 'compliments' are mainly on account of gifts to the Trade Representatives and others and cannot come, in our opinion, in the category of entertainment expenditure. As a matter of fact, there is a separate provision prohibiting such gifts under the U. K. Law as seen from the judgment of the Gujarat High Court to which we have referred. It is not the Department's case that these compliments or gifts were not given out of business expediency, since they are disallowed as entertainment. In any case, we see no justification to hold that any extra commercial consideration was involved. The sudde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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