Business meals for trade clients are not entertainment expenditure when incurred in the ordinary course of business.

Light refreshments and routine working meals served to trade clients in the ordinary course of business were not treated as entertainment expenditure under section 37(2B) of the Income-tax Act, 1961, because such outlays were regarded as allowable business expenditure. The Tribunal followed its earlier view and supporting High Court decisions, and the disallowance was deleted with the deduction allowed.

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Issues: Whether expenditure incurred on serving light refreshments and routine working meals to customers in the ordinary course of business was disallowable as entertainment expenditure under section 37(2B) of the Income-tax Act, 1961.

Analysis: The Tribunal followed its earlier view, supported by High Court decisions, that light refreshments and routine meals served to trade clients in the ordinary course of business do not constitute entertainment expenditure. Such expenditure was treated as allowable business expenditure and not hit by the disallowance provision.

Conclusion: The disallowance was rightly deleted and the assessee was entitled to the deduction.

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