TaxTMI 
TaxTMI 
1979 (6) TMI 24
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....se expenditure of Rs. 13,902 is an item of allowable expenditure falling under section 37(3) of the Income-tax Act, 1961? " The assessee in this case is a limited company. In returns filed for the assessment year 1969-70, the assessee claimed exemption towards guest house expenditure amounting to Rs. 13,902 consisting of the following items : Rs. (i) Provisions 8,901 (ii) Other expenditure 3,154 (iii) Equipments like crockery, utensils, etc., written off 1,847 --------- Total 13,902 --------- The ITO on going through the materials placed before him came to the conclusion that only customers of the assessee stayed in the guest house and, therefore, the deduction claimed by the assessee was not permissible under sub-s. (3)....
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....equired to be answered in this reference is whether the expenses towards guest house as claimed by the assessee falls within the purview of sub-s. (3) of s. 37 of the Act. Sub-sections (1) and (3) of s. 37 read as follows : " (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and section 80VV and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession '. (3) Notwithstanding anything contained in sub-section (1), any expenditure incurred by an assessee after the 31st day o....
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....3) of r. 6C which is relevant reads as follows : " (3) No allowance shall be made in respect of expenditure incurred on the maintenance of any residential accommodation in the nature of a guest house unless the assessee maintains a register showing the following particulars, namely : (i) the name and address of every employee and, in the case of an assessee being a company, firm, an association of persons or a Hindu undivided family, also every director of the company, partner or member of the firm, association or family, as the case may be, who had stayed in the guest house; (ii) whether his stay in the guest house was for the purposes of the business or profession of the assessee ; (iii) the date of his arrival at the guest house ....
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....e. Sri S. R. Rajasekhara Murthy, learned counsel appearing for the revenue, however, contended that the stress in sub-s. (3) is only on accommodation and this is clear from the use of words any residential accommodation including any accommodation in the nature of a guest house and, therefore, only expenses towards residential accommodation could be allowed under sub-s.(3) of s. 37 of the Act and not other expenses. In our opinion, the use of the words " any residential accommodation including any accommodation in the nature of a guest house " on the other hand clearly indicates that the allowances permitted under sub-s. (3) of s. 37 of the Act are not only in respect of residential accommodation provided but also any accommodation in t....