2005 (3) TMI 104

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....re could not be allowed under section 37 of the Income-tax Act but its allowability was to be restricted under section 37(2A) of the Act being expenditure in the nature of entertainment ? 2. Whether the Tribunal was correct in holding that the expenditure of Rs. 99,586 incurred by the company in making donation in cash and kind to educational institution for development of play ground with Deer Park containing a sign board of the donors could not be allowed as deduction under section 37 of the Act ?" 2. Briefly stated the facts giving rise to the present reference are as follows : The reference relates to the assessment year 1983-84. 3. The applicant claimed expenses amounting to Rs. 42,491 as sales promotion expenses and a sum of Rs. 8....

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....uld not be applicable. So far as the advertisement expenses are concerned he submitted that the applicant had incurred an expenditure for advertisement and in fact a board of the applicant's company was also installed in the deer park of Vardhman Academy. Thus, the expenditure was liable to be allowed. Learned standing counsel, however, submitted that after insertion of Explanation 2 to section 37 of the Act, the scope of entertainment expenditure has been widened and, therefore, hospitality of every kind is to be included in the word "entertainment" and the expenditure has to be limited as provided under sub-section (2A) of the Act. So far as advertisement expenses are concerned he submitted that the Tribunal has categorically found, as a ....

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....uits and sweets for Deewali and expenditure incurred on lunches and dinners to officers and engineers of different State Electricity Boards would be covered under the term "entertainment expenditure" and the limit provided under sub-section (2A) of section 37 of the Act would be attracted. 6. So far as the expenses incurred on alleged advertisement are concerned we find that the applicant had initially put the amount of Rs. 45,000 given to the Vardhman Academy in the charity/donation account and only on the last date of the accounting year it had transferred the same to the advertisement account. The Tribunal had rightly drawn an inference that from the very beginning the intention was to give charity/donation and not advertisement. So far....