Bare meals supplied for business purposes were deductible and not disallowed as entertainment expenditure under the Income-tax Act.

Expenditure on supplying bare meals to customers and constituents in the assessee's commission agency business was held to be deductible as business expenditure. Applying the earlier binding view on identical facts, the court treated the spending as incurred for business purposes and not as entertainment expenditure. Accordingly, the disallowance under section 37(2B) of the Income-tax Act, 1961, did not apply, and the reference was answered in favour of the assessee.

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Issues: Whether the expenditure incurred on supply of bare meals to customers and constituents was entertainment expenditure disallowable under section 37(2B) of the Income-tax Act, 1961, or was allowable as business expenditure.

Analysis: The assessment years in question were governed by the Income-tax Act, 1961. The same expenditure, on identical facts concerning the assessee's business of commission agency in cotton, had already been held in an earlier reference to be deductible as business expenditure. Following that binding view, the expenditure on bare meals supplied to customers and constituents was not treated as entertainment expenditure for the purpose of disallowance.

Conclusion: The question was answered in favour of the assessee. The expenditure was held to be allowable as business expenditure and not hit by section 37(2B) of the Income-tax Act, 1961.

Final Conclusion: The reference was answered by holding that the disputed messing expenses were deductible and not disallowable as entertainment expenditure.

Ratio Decidendi: Expenditure incurred on supplying bare meals to customers and constituents, when incurred for business purposes, is deductible as business expenditure and does not fall within the disallowance for entertainment expenditure under section 37(2B) of the Income-tax Act, 1961.

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