1989 (4) TMI 31

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....nancial Corporation Ltd., Chandigarh, filed its return for the assessment year 1974-75 and therein claimed expenses of Rs. 16,745 for providing lunch and other refreshments to its directors and other persons during meetings. On scrutiny, the Income-tax Officer found that most of the items pertained to tea and lunch served on different occasions which, according to him, were expenses on entertainment. He further found that some expenses were not connected with the business of the assessee. He disallowed Rs. 10,000 on an estimate basis. On appeal, the Appellate Assistant Commissioner came to the conclusion that the expenditure to the tune of Rs. 2,055 could be said to be spent on entertainment or refreshment/lunch to customers/loanees. Out....

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....efore a Full Bench of this court in CIT v. Khem Chand Bahadur Chand [1981] 131 ITR 336 and it was held that such expenses could not be allowed under section 37(1) of the Act, and were covered by section 37(2A) of the Act. In taking this view, this court dissented from the view taken by the Gujarat High Court in CIT v. Patel Brothers and Co. Ltd. [1977] 106 ITR 424. On behalf of the assessee, learned counsel has cited Maharaja Shree Umaid Mills Ltd. (No. 1) v. CIT [1989] 175 ITR 70 (Raj) and CIT v. Agarpara Co. Ltd. [1987] 167 ITR 866. In these cases, the view of the Gujarat High Court in Patel Brothers' case [1977] 106 ITR 424 has been followed. Since the Full Bench decision is binding, we are of the opinion that the expenses incurred by th....