2010 (4) TMI 296

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.... Assessment Year 1987-88. The assessee-appellant has sought to raise the following substantial question of law:- "Whether the Tribunal was correct in law on the facts and circumstances of the case in disallowing the Guest House expenses which are amounting to Rs. 9,59,60/- allowable under Section 30 read with Section 32 or they are to be disallowed under Section 37(4)?" 2. Brief facts of the present case are that return of income in respect of the assessment year 1987-88, was filed on 19.10.1987, which was processed under Section 143(3) and the Assessing Officer made an addition of Rs. 95,960/- claimed by the assessee-appellant as expenses on rents, repair, taxes and maintenance of Guest House. The addition was made primarily on the g....

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.....e.f. 28th February, 1970, the High Court held that these clearly prohibited allowing deduction in respect of expenditure incurred for the maintenance of a guest house. The Hon'ble Kerala High Court has also referred to the two decisions in the cases of CIT vs. Ahmedabad Mfg. and Calico Printing Co. Ltd. 197 I.T.R. 538 and CIT vs. Chase Bright Steel Ltd. 177 I.T.R. 124 and has taken a view that after the introduction of sub-section (4) and (5) of section 37, expenditure on the maintenance of guest house will not be allowable under section 30 of the Act. The relevant paragraph at page 237 of 229 I.T.R. is reproduced below:- "A reading of sub-section (4) and more clarified by sub-section (5) would clearly show that any accommodation by wha....

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....he Calcutta High Court in the case of CIT vs. Upper Ganges Sugar Mills Ltd. 206 I.T.R. 215 has also held that the language of sub-section (4) of section 37 of the Income Tax Act is quite emphatic and provides that no allowance at all is intended in respect of any expenditure incurred after February 28, 1970, on the maintenance of any residential accommodation in the nature of guest house. The prohibition against the allowance of maintenance expenditure in respect of guest house is unmitigated. Respectfully following the judgements of the Kerala High Court and Calcutta High Court, we hold that expenditure by way of rent forms part of the maintenance of guest house and is, therefore, not allowable u/s 30 of the Act. Accordingly, we set aside ....