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TMI Blog1978 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal is correct in law in holding that the rule provides only for guest houses and no rule has been, made for residential accommodations other than guest houses, and hence no registers need be kept for claiming deduction for expenditure incurred towards the maintenance of the residential accommodations other than guest houses ? (2) Whether, on the facts and in the circumstances of the case, and on the interpretation of section 37 of the Income-tax Act, the Income-tax Appellate Tribunal is correct and justified in law and had materials before it in holding that the expenditure of Rs. 50,000 incurred by the assessee towards valuation of its properties, is one wholly and exclusively for the purposes of its business, and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of registers, the assessee was not entitled to claim deduction in respect of the amount of Rs. 38,219 for maintenance of the guest house. Regarding the second head of claim, namely, the expenditure incurred for valuation of the properties, the AAC was not satisfied that the expenditure was incurred wholly and exclusively for the purpose of the business. In the result, he confirmed the order of the ITO and dismissed the assessee's appeal. On further appeal, the Tribunal allowed both the claims of the assessee. At the instance of the department, the questions of law have been referred and sent up for our determination and opinion. Section 37(3) of the Act reads : " 37. (3) Notwithstanding anything contained in sub-section (1), any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g company, one or more guest houses at Bombay; (ii) in the case of any other assessee, one or more guest houses at Delhi and at not more than two other places in India, which may be the capital of a State Government or any other place which is of direct importance to the business or profession of the assessee; (d) where the assessee maintains one or more guest houses at any place other than the places referred to in clause (a) or clause (b) or clause (c) any such guest house or guest houses exclusively used by his employees while on leave : Provided that the assessee has in his employment not less than one hundred whole-time employees throughout the relevant previous year and the guest house is, or the guest houses are, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) the date of his arrival at the guest house and the date of his departure therefrom; (iv) the amount, if any, paid by him towards his lodging and boarding in the guest house. (4) For the purposes of this rule, and rule 6D,-- (i) the expression 'guest house' shall include accommodation hired or reserved by the assessee in a hotel for a period exceeding one hundred and eighty-two days during the previous year ; [ii) the expression 'salary' shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule. " The type of accommodation in respect of which the claim for deduction is made in this case is " residential accommodation " as referred to in s. 37(3). Counsel for the revenue would contend th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an inclusive definition. Whatever be the position, there can be little doubt that s. 37(3) of the Act treats a guest house somewhat differently from a residential accommodation in the general sense of the term. There seems also to be sufficient justification for doing so. Having thus treated a guest house as separate and different, it has left the extent to which, and the conditions subject to which, the deduction of the expenses is to be allowed, to be prescribed under the Rules. This is discharged by r. 6C. The rule faithfully reflects the ambit of s. 37(3), in that it refers to " residential accommodation including guest house ". But there can be no doubt that the scope and the content of the rule is limited only to the inclusive part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deductibility of the expenses in respect of " residential accommodation " as different from a " guest house ", the laying out or incurring of the expenditure has still to be tested on the touchstone of s. 37(1) of the Act. We are satisfied that this has been done by the Tribunal. In the order of the Tribunal it has referred to its prior order in Aruna Sugars Ltd. v. ITO (I.T.A. Nos. 983 and 984/72-73 dated July 16, 1974) ; a copy of that order has been annexed as annex. 'D' to the application. That order, besides giving reasons for the view taken by the Tribunal in support of its construction of the section and the rule, has also recorded the finding that the expenses incurred by the assessee have to be allowed under s. 37(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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