1978 (7) TMI 79 - HC - Income Tax

Deduction granted for food expenses; business expenditure for employee meals; partial deduction permissible.

The court allowed a deduction of Rs. 1,761 for food expenses, reducing the disallowance to Rs. 500. The remaining amount was considered as business ... Fooding expenses - permissible deduction from business income - entertainment expenses under s. 37A of the I.T. Act - business expenditure in relation to employees' mealsFooding expenses - entertainment expenses under s. 37A of the I.T. Act - business expenditure in relation to employees' meals - Extent to which the assessee's claim for deduction of Rs. 2,261 as fooding expenses for assessment year 1973-74 was allowable - HELD THAT: - The Tribunal and AAC found that part of the claimed amount related to meals supplied to employees who were paid low salaries, stayed in the shop, and were thus provided sustenance as an incident of employment, while a smaller part related to occasional meals supplied to customers. A prior decision, CIT v. Manoo Ram Ram Karan Dass , had held that fooding expenses for customers were not permissible deductions. Applying these findings, the court treated the expenditure on meals supplied to customers as falling within the ambit of entertainment expenses and therefore not allowable, but treated meals provided to employees as ordinary business expenditure and allowable. The AAC's view that the claim lacked some supporting detail led to a reasonable limited disallowance of Rs. 500 as attributable to customer meals; the balance was held to be deductible as business expenditure.Deduction allowed to the extent of Rs. 1,761; disallowance of Rs. 500 sustained; assessee entitled to costs of Rs. 200.Final Conclusion: The claim for deduction of Rs. 2,261 for assessment year 1973-74 is allowable only to the extent of Rs. 1,761; Rs. 500 is disallowed as expenses attributable to customers (entertainment), and the assessee is awarded costs of Rs. 200. The court allowed a deduction of Rs. 1,761 for food expenses, reducing the disallowance to Rs. 500. The remaining amount was considered as business expenditure for providing meals to employees, not entertainment expenses. The claim for deduction of Rs. 2,261 was partially permissible. The assessee was awarded costs of Rs. 200.