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TMI Blog1980 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... sums over a period of years to its directors as " entertainment allowance " bat the In thought that the allowance which was deductible was limited to Rs. 5,000 under s. 37(2) of the I.T. Act, 1961. The present statement of case relates to the assessment years 1961-62 to 1967-68. The statement requires to determine the following question: " Whether, on the facts and in the circumstances of the case, entertainment allowance paid to the directors by the assessee-company could be allowed as a deductible revenue expense in the computation of the income, profits and gains of the assessee-company relating to the assessment years 1961-62 to 1967-68, respectively ?" The provisions of s. 37(2) show that all expenditure not being of capital natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the salary. An allowance of the type mentioned in the statement of case can also be described as part of the salary received by the directors as employees of the company. It would follow that as far as the directors themselves are concerned it can be said that the " entertainment allowance received was no more than a perquisite received by them within the meaning of that term in s. 17 and, therefore, the amount had to be included as a part of the salary income of the directors. An amount which is paid to an employee as salary cannot be described as being an " entertainment expenditure " of the employer himself. It may be that the employee may use the amount for his own entertainment or entertainment of others, but by no means can i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaking. The Explanation attached widened the scope of the section to include such allowances. The learned counsel for the respondent has referred to a decision the Bombay High Court in CIT v. Devkaran Nanjee Insurance Company Ltd, [1977] 110 ITR 815 in which a similar point was involved and it was held that(p.819): "......we are in agreement with the view of the Tribunal that the limit on entertainment expenses prescribed by pi. 37(2) would only apply to such expenses as could be held to have been incurred by the company there would be no occasion for applying these provisions where certain amounts were paid to the employees which could be considered as part their salary and where there was no obligation on the part of the recipient to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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