9911796707
TMI Blog1982 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 1970-71, the assessee claimed deduction of business expenses amounting to Rs. 94,665. This claim included the expenditure of Rs. 20,680 made up of the following items : Rs. (1) Ganeshji hi Puja 958 (2) Rickshaw, etc., for customers (Rs. 4,620): only 1/4th taken in view of the assessee's explanation 1,155 (3) Festival allowance to staff 1,276 (4) Entertainment of jalpan, etc., to customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance to staff, jalpan, etc., for customers, deepawali sweetmeats and glasses for drinking water to customers could be treated as entertainment expenditure and as such the ITO was justified in concluding that from out of the expenditures on aforementioned five items, only a deduction of Rs. 5,000 could be given as provided in s. 37(2A) of the I.T. Act. So far as the expenditure of Rs. 958 on Ganeshji ki Puja was concerned, it was not an expenditure laid out wholly and exclusively for the purposes of the assessee's business, and as such the same could not be allowed as deduction. The appellate authority, therefore, concluded that the ITO was justified in allowing only a sum of Rs. 5,000 as permissible deduction in expenses from out of the sum of Rs. 20,680 claimed by the assessee under the aforementioned heads and that the addition of Rs. 15,680 to the assessee's income was justified. Thereafter, the assessee went up in appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal affirmed the decision of the AAC and ruled that an amount of Rs. 958 claimed to have been spent by the assessee on Ganeshji ki Puja was not allowable as an expenditure laid out wholly for carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts. In these circumstances, it would not be correct to say that the expenditure incurred by the assessee over Ganeshji ki Puja was not connected with its trade and was its personal expenditure like the expenditure incurred by its partner in performing other worship at his own house for personal solace. As would be evident from Chaturvedi and Pithisaria's Income Tax Law, 2nd edn., vol. 1, p. 828, the Board of Direct Taxes issued a Circular No. 17 of 1943, dated 6th of May, 1943, which ran thus: " It has been represented to the Board that customary payments in respect of Deepawali (or Diwali) and Mahurat (i. e., the auspicious day of starting new accounts) which long usage and custom have made it obligatory for a business to incur, should be allowed as a deduction in computing the income under sections 10 and 12 of the Income-tax Act. The Board understands that such expenses are generally of the nature of advertisement with a view to securing new business and that though varying according to the nature and extent of the business, the maximum expenditure is about Rs. 200 on Diwali or Mahurat. The Board consider that since these expenses are not of a personal, social or religious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 37(2A) of the I.T. Act. Before any portion of a business expenditure can be disallowed under s. 37(2A), it has to be shown that it is in the nature of entertainment expenditure. In the case of Brij Ramans Dass & Sons v. CIT [1976] 104 ITR 541, a Division Bench of this court pointed out that the word " entertainment " had different meanings for purposes of different Acts. In the I.T. Act, the said word had not been defined and it would have to be given its general meaning. It opined that for the purposes of the I.T. Act" entertainment expenditure " would include all expenditure incurred in connection with the business on the entertainment of customers and constituents. Such entertainment may consist of providing refreshment to customers or in providing some other sort of entertainment to them. When a similar question, viz., whether messing expenses incurred by the assessee for its constituents could be considered to be entertainment expenditure came up before another Division Bench of this court in the case of CIT V. Manoo Ram Ram Karan Das [1979] 116 ITR 606, the Bench approved and followed the decision in Brij Raman Dass & Sons case [1976] 104 ITR 541 (All). When its attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainment to its customers, qualifies as entertainment expenditure for the purposes of s. 37(2A). Any expenditure in providing messing to the low paid employees of the trader, however, does not qualify as entertainment expenditure under s. 37(2A) of the Act. During the course of hearing learned counsel for the assessee relied upon the decisions of the Bombay, Karnataka, Madras, Madhya Pradesh and Andhra Pradesh High Courts in the cases of CIT v. Devkaran Nanjee Insurance Co. Ltd. [1977] 110 ITR 815 (Bom), CIT v. Corporation Bank Ltd. [1979] 117 ITR 271 (Kar), Addl. CIT v. Bangalore Turf Club Ltd. [1980] 126 ITR 430 (Kar), CIT v. Karuppuswamy Nadar & Sons [1979] 120 ITR 140 (Mad), South India Viscose Ltd. v. CIT [1982] 135 ITR 206 (Mad), CIT v. Lakhmichand Muchhal [1982] 134 ITR 234 (MP) and Addl. CIT v. Maddi Venkataratnam & Co. Ltd. [1979] 119 ITR 514 (AP), wherein a view which is not wholly consistent with the view followed in this court regarding as to what constitutes entertainment expenditure within the meaning of the expression as used in s. 37(2A) of the I.T. Act, has been taken. Be that as it may, we are bound by the consistent view taken by this court on this question. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l allowance to staff amounting to Rs. 1,276 and the expenditure incurred in distributing Deepawali sweetmeats amounting to Rs. 135 do not, for Purposes of s. 37(2A) of the Act, constitute assessee's entertainment expenditure. Item No. 4, namely, a sum of Rs. 17,118 said to have been spent by the assessee on jalpan, etc., of its customers and a sum of Rs. 38 said to have been spent by it for purchasing glasses for providing drinking water to the customers are expenses of similar nature and they fall in the same category. According to the view of this court, expenditure incurred by the assessee over providing refreshments, etc., to its constituents or customers qualifies as entertainment expenditure within the meaning of s. 37(2A) of the I.T. Act. Obviously, the amount spent in purchasing articles in which the refreshment, etc., is to be provided to the customers would partake of the nature of refreshment expenditure themselves. We are, accordingly of opinion that Rs. 17,118 mentioned at item No. 4 and Rs. 38 mentioned at item No. 6 have to, for purposes of s. 37(2A) of the I.T. Act, be treated as entertainment expenditure and that from out of these two amounts, the petitioner would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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