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of <h1>Court Partially Allows Application on Entertainment Expenditure: Detailed Analysis of Income-tax Act</h1> <h3>Commissioner Of Income-Tax Versus Willard India Ltd.</h3> The court partially allowed the application, specifically addressing the issue related to entertainment expenditure under section 37(2A) while disposing ... Reference, Business Expenditure, Entertainment Expenditure, Disallowance Issues:1. Entertainment expenditure under section 37(2A) deletion2. Addition deletion under section 40A(5)3. Bonus claim deletion due to accounting method change4. Expenditure admissibility under section 40A(3) exceptional circumstancesEntertainment Expenditure (Section 37(2A)):The Department filed an application under section 256(2) of the Income-tax Act, 1961, questioning the deletion of Rs. 97,824 towards entertainment expenditure by the Tribunal. The Tribunal allowed 50% expenditure based on past allowances without considering the provisions of section 37(2A). The court directed the Tribunal to draw up a statement of the case for this issue.Addition Deletion (Section 40A(5)):The Department raised concerns over the deletion of Rs. 1,39,658 under section 40A(5) by the Tribunal, arguing for disallowance based on rule 3C(ii) of the Income-tax Rules, 1962. The Tribunal's decision was upheld, stating that the disallowance should be calculated as per the mentioned rule.Bonus Claim Deletion - Accounting Method Change:The Department contested the deletion of Rs. 3,67,872 by the Tribunal regarding a bonus claim due to a change in accounting method. The Tribunal justified the deletion based on a Supreme Court decision, citing the change from cash to mercantile system. The court found the Tribunal's decision legally sound.Expenditure Admissibility (Section 40A(3)):Regarding the expenditure of Rs. 4,32,730 disallowed under section 40A(3) by the Assessing Officer, the Department argued for disallowance due to non-payment by cheque or bank draft. The Tribunal, however, allowed the expenditure under exceptional circumstances as per rule 6DD(j) of the Income-tax Rules. The court upheld the Tribunal's decision, stating that there was no violation of section 40A(3) in this case.In conclusion, the court partially allowed the application, specifically addressing the issue related to entertainment expenditure under section 37(2A) while disposing of the application accordingly. The judgment provided detailed analysis and interpretations of the Income-tax Act provisions, rules, and relevant case law to resolve each issue effectively.
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