Entertainment expenditure test: messing expenses for trade constituents were held deductible, not disallowable.

Messing expenses incurred in supplying meals to trade constituents were not treated as entertainment expenditure under section 37(2B) of the Income-tax Act, 1961. The Rajasthan HC followed its earlier decision that such expenses in the assessee's business of adat and sale of agricultural commodities did not fall within the statutory meaning of entertainment expenditure. The expenditure was therefore allowable as a deduction, and the issue was answered in favour of the assessee and against the Revenue.

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Issues: Whether messing expenses incurred in supplying meals to trade constituents constituted "entertainment" within the meaning of section 37(2B) of the Income-tax Act, 1961 and were therefore disallowable.

Analysis: The question was covered by an earlier decision of the same Court holding that messing expenses incurred in the assessee's business of adat and sale of agricultural commodities could not be characterised as entertainment expenditure under section 37(2B) of the Income-tax Act, 1961.

Conclusion: The expenditure was not entertainment expenditure and was allowable as a deduction; the question was answered in favour of the assessee and against the Revenue.

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