Guest-house expenditure disallowed under section 37(4) because the special tax bar overrides general allowance provisions.

Expenditure on maintaining residential accommodation used as a guest-house for business-related stay of officials and technicians was held to fall within the special restriction in section 37(4) of the Income-tax Act, 1961. The general depreciation or allowance provisions could not override that express prohibition because the special provision prevails over the general rule. The Tribunal's view was upheld, and the expenditure was disallowed under section 37(4), with the reference answered in favour of the Revenue.

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Issues: Whether expenditure incurred on maintaining residential accommodation used as a guest-house for business-related stay of officials and technicians was disallowable under section 37(4) of the Income-tax Act, 1961, notwithstanding the assessee's reliance on general depreciation provisions.

Analysis: Section 37(4) specifically governs expenditure on guest-house accommodation and operates as a special provision. The generalia specialibus non derogant principle applies, so a general allowance cannot override an express statutory restriction. The Tribunal's view that the special prohibition in section 37(4) prevailed over the general claim for allowance was upheld.

Conclusion: The expenditure was correctly disallowed under section 37(4) of the Income-tax Act, 1961, and the answer to the referred question was in favour of the Revenue.

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