Guest house maintenance expenditure disallowed under section 37(4) where the accommodation fell within the statutory bar.

Section 37(4) of the Income-tax Act, 1961 contains a non obstante clause that specifically disallows expenditure on the maintenance of any residential accommodation in the nature of a guest house incurred after 28 February 1970. The provision leaves no scope for allowance once the accommodation falls within that description. On that basis, the Madhya Pradesh HC held that maintenance expenditure for such guest-house accommodation was not allowable, and the issue was answered in favour of the Revenue.

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Issues: Whether expenditure incurred on the maintenance of residential accommodation in the nature of a guest house was disallowable under section 37(4) of the Income-tax Act, 1961.

Analysis: Section 37(4) of the Income-tax Act, 1961 contains a non obstante clause and specifically disallows expenditure on the maintenance of any residential accommodation in the nature of a guest house incurred after 28 February 1970. The provision leaves no scope for allowance of such expenditure once the accommodation answers that description.

Conclusion: The expenditure was not allowable under section 37(4) of the Income-tax Act, 1961, and the question was answered in favour of the Revenue.

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