Tea and cold drink to visitors held as allowable business expense, not entertainment expenditure under tax law.

Expenses on tea and cold drinks provided to visitors and customers were held not to be entertainment expenses under section 37(2B) of the Income-tax Act, 1961. Relying on its earlier view that such messing-type expenditure does not fall within the disallowance provision, the Rajasthan HC treated the outlay as an admissible business expense. The cost was therefore allowable in computing the assessee's total income, and the disallowance was rejected in favour of the assessee.

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Issues: Whether expenses incurred in providing tea and cold drinks to visitors and customers were entertainment expenses within the meaning of section 37(2B) of the Income-tax Act, 1961 and therefore disallowable.

Analysis: The Court followed its earlier view that messing-type expenditure of this nature does not constitute entertainment expenses. On that basis, the cost incurred in providing tea and cold drinks to visitors and customers was treated as an admissible business outlay and not as expenditure hit by the disallowance under section 37(2B) of the Income-tax Act, 1961.

Conclusion: The expenditure was not entertainment expense and was allowable in computing the total income of the assessee; the answer was in favour of the assessee.

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