1999 (8) TMI 49

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....he deduction of Rs. 54,305 ?" The material facts giving rise to the question are as under : The assessee is engaged in the business of manufacture of plastics. It has its factory at Poiser, Kandivali. It has an office at Bombay, which is situated at Lotus House. The assessee has also offices in Delhi, Calcutta, Bhagwara and Sonipat. During the previous year ended March 31, 1977, relevant to the assessment year 1977-78, to which the reference pertains, the assessee incurred expenditure of Rs. 59,305 in its various offices for the purpose of providing tea, coffee, cold drinks, snacks, and at times, meals to its customers. The assessee debited this expenditure under the head "Sales promotion expenses". The Income-tax Officer did not allo....

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....rothers and Co. Ltd. [1995] 215 ITR 165 had held that despite the restrictions imposed in allowing "entertainment expenditure" as a business expenditure by virtue of sub-section (2A) of section 37 of the Act, the expenditure incurred in extending customary hospitality by offering ordinary meals as a bare necessity, was not "entertainment expenditure" within the meaning of sub-section (2A) of section 37 of the Act. That position, however, has changed with the enlargement of the meaning of "entertainment expenditure" by insertion of Explanation 2 to subsection (2A) of section 37 of the Act by the Finance Act, 1983, with retrospective effect from April 1, 1976. Explanation 2 reads : "Explanation 2.---For the removal of doubts, it is here....