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TMI Blog1979 (8) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... s and that he would appreciate if the assessee could make arrangements for the same. It was further suggested by Shri Kapoor that the assessee should host a dinner for the delegates on 14th October, 1969, and that M/s. Ashok Leyland would compensate the assessee in some other way for the expenditure incurred by it. In pursuance of this letter, the assessee spent a sum of Rs. 13,135 on the Ashok Leyland Dealers' Conference in respect of taxi bills and dinner, etc. In addition to this expenditure, the assessee also spent the sum of Rs. 4,543 on providing tea, etc., to its customers and members of the staff. Holding that the expenditure of Rs. 17,678 was in the nature of entertainments, the ITO disallowed the same while passing order for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner that the expenses amounting to Rs. 13,135 were incurred by the assessee wholly and exclusively for the purpose of its business. The same are, therefore, allowable." At the instance of the revenue, the Tribunal has referred the following question for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenses of Rs. 13,135 were allowable under section 37 of the Income-tax Act, 1961 ? " It has been argued on behalf of the revenue that in view of s. 37(2A) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), the sum of Rs. 13,135 incurred as business expenses by the assessee on the conference were not allowable as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia, on the nature and type of business, item of entertainment, place of entertainment and tradition and habits of the people of the area where the assessee is carrying on his business. In any case, it was contended that hospitality shown on account of obligation of business arising as a result of an express or implied contract or arising on account of the long standing custom of a trade, business or profession, cannot amount to entertainment and acts done in discharge of such obligations cannot be included and covered in the term it " entertainment " in s. 37(2A) of the Act. It was further submitted that in the present case, the assessee was under business obligation to make proper arrangements for the cars and the lunch, etc., for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsist of providing, inter alia, a formal or elegant meal, a banquet and being hospitable in providing for the wants of a guest in a liberal and generous manner. If the act of entertaining is on a lavish and a grand scale involving wasteful expenditure, it would, no doubt, amount to entertainment. On the other hand, if the acts or practice of being hospitable in the sense of providing meals, drinks or other wants of persons entertained, whether they may be employees, workmen or officers, servants or agents in the service of an assessee, as an express or implied condition of service, they would not amount to acts of entertainment. Similarly, if the acts or practice of being hospitable in the sense of providing meals, drinks or satisfying any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler of M/s. Ashok Leyland, Madras. The Tribunal is right in observing that since no dealer could afford to offend the manufacturers, the assessee had no choice, but to arrange for the cars, etc., for the delegates, as desired by Shri M.D. Kapoor, sales director, of M /s. Ashok Leyland, Madras. But the question that still remains to be answered is whether in the present case the amount incurred on meals, i.e., lunch, etc., which is included in the total amount of expenditure, was also spent on account of business compulsion or was it a voluntary one? Taking into consideration the definition of the word " entertainment " and the conclusions given above by the Gujarat High Court, we are of the opinion that the amount spent on meals, etc., will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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