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TMI Blog1986 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 256(2) of the Income-tax Act (for short " the Act "). The Tribunal has referred the following questions for the opinion of this court: "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in confirming the order of the Commissioner of Income-tax (Appeals) allowing a further sum equal to 25% of the total expenditure incurred in connection with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has spent a sum Rs. 32,923. The said sum included a sum of Rs. 12,875, being the expenses incurred in connection with dinner, tea and travelling expenses in respect of the Japanese delegation. The company claimed the entire amount as deduction under the head " Business expenditure ". The Income-tax Officer, however, allowed only one-fourth of that amount as "entertainment expenditure " incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure incurred by the company might be allocated towards the expenses incurred by the company on the employees who bad accompanied the Japanese delegation and who partook in the entertainment. That is a discretion which, in our opinion, cannot be said to be arbitrary. There is no material to show that anything less than that amount could have been allocated. We, therefore, answer the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, '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 not include expenditure on food or beverages provided by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on other than the employees.It is not in dispute that the shareholders are not the employees of the company and it is also not in dispute that the expenditure was incurred towards the entertainment of the shareholders. Obviously, therefore, it falls within the first part of Explanation 2. We, therefore, answer the second question in the negative and in favour of the Revenue. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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