1985 (9) TMI 9

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....d 1978-79, the assessee claimed allowance of expenditure incurred on account of entertainment, office and other miscellaneous expenses in the head office and various branches. The Income-tax Officer disallowed part of the expenditure incurred by the assessee on account of entertainment expenses, office expenses and miscellaneous expenses. On appeal, the Commissioner of Income-tax (Appeals), Rajasthan, Jaipur, sustained the disallowance of entertainment expenses, office and miscellaneous expenses to a certain extent and reduced the amount disallowed by the Income-tax Officer. Before the Income-tax Appellate Tribunal, the appeals relating to the aforesaid three assessment years were heard together and the only objection raised on behalf of th....

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....the order of the CIT (Appeals) reducing the disallowance of entertainment expenses, office expenses and miscellaneous expenses from Rs. 35,834 to Rs. 21,000 (for assessment year 1976-77), from Rs. 35,242 to Rs. 20,000 (for assessment year 1977-78) and from Rs. 34,858 to Rs. 19,000 (for assessment year 1978-79) by construing the expression 'entertainment expenditure' occurring in section 37(2A) and 37(2B) of the Income-tax Act in a liberal manner ?" It may be pointed out that after the Income-tax Appellate Tribunal rejected the application of the Department under section 256(1) of the Act refusing to make a reference to this court, the provisions of section 37 of the Act have been amended by the Finance Act, 1983, with retrospective effect ....

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....ed by the Income-tax Appellate Tribunal. The only question which was raised and decided by the Income-tax Appellate Tribunal related to allowing of expenditure of the nature of entertainment expenditure. After the addition of Explanation 2 to sub-section (2A) of section 37 of the Act, it is absolutely clear that every kind of hospitality extended by the assessee to any person except his employees by providing food or beverages or in any other manner whatsoever would be includible in the expression " entertainment expenditure " occurring in sub-section (2A) of section 37 of the Act. Thus, if the assessee supplied drinks, food or other hospitality to the customers by reason of any express or implied contract or even on account of Custom or us....