Customer refreshments treated as entertainment expenditure, making the related business deduction unavailable under tax law.

Expenditure on tea, pan, meals and similar refreshments supplied to customers was treated as entertainment expenditure under section 37(2A) of the Income-tax Act, 1961, and therefore was not deductible as a business expense. The Court followed its earlier binding decisions that customer refreshments and meals fall within the statutory mischief of entertainment expenditure. The assessee's claim for deduction was rejected, and the issue was answered in favour of the Revenue.

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Issues: Whether the expenditure incurred in serving tea, pan and meals to customers was entertainment expenditure within the meaning of section 37(2A) of the Income-tax Act, 1961 and therefore not allowable as a deduction.

Analysis: The expenditure claimed was for providing refreshments and meals to customers visiting the assessee. The Court applied its earlier binding decisions holding that expenditure on refreshments and meals supplied to customers amounts to entertainment expenditure. On that basis, the assessee's claim could not be treated as an allowable business deduction under the provision.

Conclusion: The expenditure fell within the mischief of section 37(2A) of the Income-tax Act, 1961 and was not allowable; the question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Expenditure incurred in providing refreshments or meals to customers constitutes entertainment expenditure for the purposes of section 37(2A) of the Income-tax Act, 1961 and is not deductible.

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