1985 (4) TMI 35

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....iding meals to the directors is business expenditure laid out wholly for the business and are not in the nature of entertainment expenses within the meaning of section 37(2B) of the Income-tax Act and are allowable for the assessment year 1972-73 ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the expenses of Rs. 7,567 incurred by the company in providing tea, cold drinks, etc., to its customers, in reception of the Chief Minister and the Industries Minister and entertainment of guests are not in the nature of entertainment expenses within the meaning of section 37(2B) and are allowable for the assessment year 1972-73 ? " During the accounting period c....

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....spondent was for providing tea, etc., to the company staff and, as such, it did not amount to entertainment expenses. Neither the Department nor the assessee were satisfied with the order of the Appellate Assistant Commissioner. The Tribunal, vide its order dated September 21, 1976, after taking into consideration the amount of entertainment expenses which were disallowed and have been detailed in para 24 of its order, recorded the following conclusion: " We have gone through the details of the expenses; but for the expenses of Rs. 1,022 which represented the payment of a hotel bill, the rest of the expenses were petty and were incurred on tea, coffee, etc. Such expenses cannot be treated as entertainment expenses. There was, therefore, ....

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....ot entertainment expenses and thus not hit by section 37(2B) of the Act. While dealing with the question, we have considered the authorities of the various High Courts and preferred to follow the view taken in CIT v. Patel Brothers & Co. Ltd. [1977] 106 ITR 424 (Guj) and CIT v. Shah Nanji Nagsi [1979] 116 ITR 292 (Bom) and the other High Courts which have taken a similar view and did not subscribe to the view taken by the Full Bench of the Kerala High Court in CIT v. Veeriah Reddiar [1977] 106 ITR 610. For the reasons given in Devichand's case and Bhanwarlal's case, we bold that the Tribunal was right in holding that the messing expenses of Rs. 2,055 which were spent by the assessee for providing meals to the directors were business expe....