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TMI Blog1998 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... debit to the profit and loss account under the head 'business promotion' amounting to Rs. 1,32,864. He clubbed both the items of expenditure which aggregated to Rs. 3,49,258 and allowing permissible deduction of Rs. 5,000 he disallowed the balance i.e. Rs. 3,44,258. 3. Being aggrieved the assessee came up in appeal before the Commissioner of Income-tax(A) and at which stage it was submitted that the expenditure should have been allowed in full in the light of CBDT Circular dated 3-10-1968 wherein no monetary limit had been laid down. The Commissioner of Income-tax(A) has discussed the issue in Para 6.3 of the appellate order duly setting out the details of the expenditure aggregating to Rs. 2,16,304 consisting of 12 types of items. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax(A) had vacated the finding of the Assessing Officer to treat the entire expenditure under the head "entertainment" but even than bringing it under the head "Diwali Expenses" he had proceeded to disallow a substantial part treating it as the personal expenditure. It was the submission of the Id. counsel that the appellant was an Undertaking of the Punjab Government whose accounts were audited by Auditors appointed by C.A.G. and in any case there was no evidence with the department. It was further stated that the entire expenditure on the gifts was fully vouched and the same had been allowed in the preceding assessment year at Rs. 1.28 lakhs (Annexure 'D' of the Paper Book). The Id. counsel also highlighted the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax(A) was in order. This was, however, countered by the Id. counsel in a short reply by stating that the department was not in appeal against the order of the Commissioner of Income-tax(A) wherein he had processed the entire expenditure under section 37(1) and not under section 37(2) by treating it as entertainment expenditure. 8. After examining the rival contentions we are of the view that there is substantial merit in the arguments advanced by the Id. counsel on behalf of the appellant. We would at the outset like to reject the arguments of the Id. counsel to the effect that the claim be processed under section 37(2) since the Commissioner of Income-tax(A) has already taken it out of the purview of the said section allowing part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomary depends on person to person and institution to institution. In the case of big assessees, a group of companies, a large business house or an assessee dealing in particular type of goods giving expensive items such as a suit length or a dinner set or for that matter tea sets etc. may be customary whereas in the case of another assessee not so well placed, a box of sweets may be customary. In other words it is a relative term. 10. One of the main grounds which weighed with the tax authorities in deciding against the assessee was that the identity of the persons to whom the "costly gifts" have been given was not disclosed. In our opinion such disclosures would neither be here nor there since the distribution of Diwali gifts is entru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs. This factual statement is not disputed by the Id. DR and we do find on perusal of 'Annexure D' of the Paper Book that the ratio of the expenditure to the turn over in both the years, appears to be quite favourable. Then again there is no basis on the part of the Commissioner of Income-tax(A) to hold that the expenditure of Rs. 1,83,460 is "personal expenditure" and if so then whose as this is the case of a Public Sector Undertaking of the Punjab Government. The other term he has used is that the expenditure is of a "social nature" but in our opinion this is quite akin to "customary nature" in the context of the festival of Diwali as it is a social practice to give and take such gifts. A list of the expenditure set out of Para 6.3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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