Trading expenditure on rented premises for staff lodging and boarding was allowable, so the disallowance provision did not apply.

Rent paid for premises used to run a business of providing lodging and boarding facilities to staff members of sister concerns was treated as trading expenditure incurred wholly for the assessee's business. On the concurrent findings of the appellate authorities, the expense was allowable under section 28 of the Income-tax Act, 1961. As a result, the disallowance provision in section 37(4) did not apply, because the payment was not a non-business or inadmissible expenditure but part of the business trading outlay.

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Issues: Whether the assessee's expenditure of Rs. 32,382 on rent for premises used to provide lodging and boarding facilities to staff members of sister concerns was trading expenditure deductible under section 28 of the Income-tax Act, 1961, and therefore not disallowable under section 37(4) of the Income-tax Act, 1961.

Analysis: The assessee's business was to provide facilities to staff members of other companies, including lodging and boarding. The premises were taken on rent for running that business, and the expenditure represented rent paid for those premises. On the concurrent findings of the Appellate Assistant Commissioner and the Tribunal, the amount was incurred wholly for the business activity of the assessee and constituted trading expenditure. Since the expense was allowable under section 28, the disallowance provision in section 37(4) did not apply.

Conclusion: The expenditure was trading expenditure allowable under section 28 of the Income-tax Act, 1961, and was not disallowable under section 37(4) of the Income-tax Act, 1961.

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