1985 (4) TMI 33

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tertainment expenditure and were, therefore, disallowable under section 37(2B) of the Income-tax Act, 1961 ? " The assessee in question is a firm engaged in the business of arhtias in foodgrains. The business of the assessee is not very extensive. The total arhat receipts for the two years were Rs. 1,02,721 and Rs. 1,14,541, respectively. In the profit and loss account, the assessee claimed Rs. 13,791 in the first year and Rs. 19,979 in the second year as miscellaneous expenses. Out of these, the Income-tax Officer disallowed Rs. 10,000 in the first year and Rs. 13,791 in the second year as being expenses on cold drinks, tea, food, etc., provided to the constituents on the ground that they were entertainment expenditure not allowable und....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work." It is interesting that this amendment was made by the Finance Act, 1983, with retrospective effect from 1st April, 1976. In other words, after 1st April, 1976, hospitality expenses have also to be treated as " entertainment expenses ". But, we are dealing with the assessment years 1972-73 and 1973-74 to which years the Explanation does not apply. We had previously had occasion to deal with the same problem in CIT v. Supreme Motors (P) Ltd. [184] 147 ITR 48 (Delhi). The same case of Brij R....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... run by it... " We finally held that this was a matter of degree and the point, should not be stretched to the extent of disallowing petty expenses. In the present case, the expenses claimed are certainly more as compared to the total turnover. But, it is not very clear as to whether this was spent on the staff or not. In the assessment order for 1972-73, the Income-tax Officer did not say to whom this coca cola, tea and food were supplied, but in the assessment order for 1973-74, he stated that Rs. 13,791 was disallowed as being food and other miscellaneous expenses incurred on beoparies. Before the Appellate Assistant Commissioner it was stated that it was a trading practice to provide food to the purchasers who came to the place of....