Entertainment allowance deduction limited to pre-1 April 1955 receipts; later-granted allowances do not qualify under the Act.

Section 7(2)(ii) of the Income-tax Act, 1922 allowed a limited deduction for entertainment allowance only where the allowance was regularly received from the same employer before 1 April 1955, and only up to one-fifth of remuneration or Rs. 7,500, whichever was less. The legislative scheme, introduced by the Finance Act, 1955, withdrew the earlier exemption and confined the new deduction to pre-existing allowances, showing that allowances first granted after that date were outside the provision. The entitlement condition was treated as an essential limitation on deduction, so later-granted entertainment allowances did not qualify.

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Issues: Whether the exception under section 7(2)(ii) of the Income-tax Act, 1922, barred deduction of entertainment allowance or any part thereof where the assessee was not regularly in receipt of such allowance from the same employer before 1 April 1955.

Analysis: The deduction scheme was introduced by the Finance Act, 1955, which simultaneously excluded entertainment allowance from the earlier exemption under section 4(3)(vi) and created a new, limited deduction under section 7(2)(ii) for only those allowances regularly received before 1 April 1955. The provision allowed deduction only to the extent of one-fifth of remuneration or Rs. 7,500, whichever was less, and the qualifying condition of pre-1 April 1955 receipt was treated as an essential limitation on entitlement. The wording and legislative history showed that new entertainment allowances granted after that date were not intended to qualify for deduction.

Conclusion: The exception applied only to entertainment allowance regularly received before 1 April 1955, and the assessee was not entitled to any deduction under section 7(2)(ii) in respect of the allowance in question.

Ratio Decidendi: A deduction for entertainment allowance under section 7(2)(ii) of the Income-tax Act, 1922, is available only if the allowance was regularly received from the same employer before 1 April 1955; allowances granted later do not qualify.

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