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TMI Blog1991 (4) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc., to customers and there were no boarding and lodging expenses". 4. The CIT(A) observed that description of expenses by the representative of the assessee indicated that they were entertainment expenses which were not allowable in view of Explanation 2 to s. 37(2A). The assessee is now in further appeal before the Tribunal. 5. The submission of learned representative of their assessee before us is that assessee was dealing in school books on wholesale basis and customers were outstation dealers and that amount of Rs.20,680 was spent in providing tea, cold drinks, pan, bidi, etc., to representatives of customers who visited business premises of assessee which were situated in an industrial area. It was further submitted that thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at entertainment expenditure included all expenditure incurred in connection with business on entertainment of customers and/or constituents, which may take the form of providing refreshment or other sort of entertainment. In the cases which took the view, expenditure on serving tea, cold drinks, pan, etc., to customers was held to be entertainment expenditure. On the other side of their fence were cases which took more liberal view in favour of assessee. The decision of Gujarat High Court in CIT vs. Patel Bros. Co. Ltd. (1977) 106 ITR 424 (Guj) is representative of said liberal view which laid down four broad tests to serve as guidelines which are as follows: "(a) if the provision of food, drinks or any amusement of a client, constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any express or implied contract or custom our usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work." 9. This Explanation clearly states that "entertainment expenditure" included expenditure on provision of "hospitality of every kind by the assessee to any person whether by way 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". Thus the intention is to remove doubt on the question (i) whether hospitality shown by incurring lavish expenditure alone was included; (ii) whether hospitality shown by reason by any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hospitality to customers and the fact that the customer himself was in need of tea or cold drinks at that time was irrelevant. If the submission of assessee is accepted, it would mean that old controversy that existed prior to insertion of Explanation 2 still persisted and that Explanation 2 had not removed the doubts that had arisen because of divergence of judicial views. This is not correct. The controversy in question which existed prior to insertion of Explanation 2 gets settled by said Explanation in view of all pervasive language used therein. 11. Attention was drawn to meaning of the term "hospitality" in Webster's Third New international Dictionary which is "giving a generous and cordial reception and entertainment to guests ..... X X X X Extracts X X X X X X X X Extracts X X X X
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