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of <h1>High Court: Kitchen expenses subject to limits under Income-tax Act. Gaushala, Dharmada funds not firm income.</h1> <h3>Commissioner Of Income-Tax, Amritsar Versus Gheru Lal Bal Chand</h3> Commissioner Of Income-Tax, Amritsar Versus Gheru Lal Bal Chand - [1978] 111 ITR 134, 1977 CTR 150 Issues involved:Assessment of kitchen expenses u/s 37(2A) of the Income-tax Act and treatment of receipts from Gaushala and Dharmada accounts as income u/s 2(24) of the Income-tax Act.Assessment of kitchen expenses:The firm claimed an allowance for maintaining kitchens at different locations for serving meals to constituents. The Income-tax Officer disallowed a portion of the claimed amount u/s 37(2A) of the Income-tax Act. On appeal, the Appellate Assistant Commissioner reduced the disallowance, citing a judgment from the Allahabad High Court. The Income-tax Appellate Tribunal allowed the firm's appeal. The Tribunal referred two questions of law to the High Court regarding the applicability of section 37(2A) to kitchen expenses.The High Court analyzed the provisions of section 37 of the Income-tax Act, particularly sub-section (2A) which limits entertainment expenditure. The court emphasized the broad interpretation of 'entertainment expenditure' and concluded that the kitchen expenses, although not strictly entertainment, fell within the nature of entertainment expenditure. The court referred to dictionary definitions of 'entertainment' to support its interpretation. It also cited a case from the Allahabad High Court regarding similar expenses being governed by section 37(2A).The High Court distinguished a contrary view from the Gujarat High Court, emphasizing the importance of the phrase 'in the nature of' before 'entertainment expenditure.' Ultimately, the court ruled in favor of the revenue, stating that the kitchen expenses were subject to the limits set by section 37(2A) of the Income-tax Act.Treatment of Gaushala and Dharmada receipts:The firm received amounts in Gaushala and Dharmada accounts, which the Income-tax Officer added back as income. On appeal, the Appellate Assistant Commissioner allowed the full amount based on a judgment from the Allahabad High Court. The Income-tax Appellate Tribunal upheld the firm's appeal, leading to the High Court addressing the second question of law regarding these receipts.The High Court considered the nature of the receipts, noting that the firm acted as a trustee for charitable purposes and spent the majority of the amount on charities. Citing a case from the Allahabad High Court, the High Court agreed that if income does not result, there cannot be a tax. Therefore, the receipts from Gaushala and Dharmada accounts were not considered income of the firm. The court ruled in favor of the firm on this issue.In conclusion, due to the divided success of the parties, no order as to costs was given.
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