1983 (10) TMI 91

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..... es that the Commissioner (Appeals) erred in holding that the medical expenses reimbursed by the assessee-company were not in the nature of perquisites for the purpose of disallowance under section 40A(5) of the Income-tax Act, 1961 ('the Act') and that for disallowing the perquisites paid to an employee-director, the provisions of section 40(c) of the Act and not those of section 40A(5) would apply. Smt. V. Gopalakrishnan, the learned representative for the department, urged before us that the Commissioner (Appeals) erred in his decision. On the other hand, Shri S.P. Mehta, the learned representative for the assessee, supported the order of the Commissioner (Appeals). We have considered the contentions of both the parties as well as the fac .....

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..... se its products because of the prohibition under the excise laws, the only alternative open to the assessee to boost its sales and earn greater commission was to give free samples of the products it wants to sell to potential customers. Shri S.P. Mehta explained that the manufacturer would not bear the cost of the samples and so, the assessee had to buy them and distribute them as samples with a view to promote their sales. Under the circumstances, he urged that the expenses have been rightly allowed as sales promotion expenses by the Commissioner (Appeals) as distinct from entertainment expenses as held by the ITO. 6. We have considered the contentions of both the parties as well as the facts on record. The case of the assessee before th .....

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..... his Explanation says that entertainment expenditure includes expenditure on provision of hospitality of every kind by the assessee to any person whether by way of provision of food or beverages or in any other manner whatsoever. It is, therefore, clear that the person to whom the gifts were made is immaterial. Once the assessee provides food or beverages free of cost, as a matter of hospitality, it is immaterial whether the said hospitality was extended with a view to boost sales or otherwise. The test is whether some hospitality was extended. The person to whom it is given or the motive behind it is immaterial for the purpose of this Explanation. The only exception stated in the Explanation itself is the provision of the food or beverages .....

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