TaxTMI 
TaxTMI 
1989 (6) TMI 81
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.... specified in s. 37(2A) of the Act. The ITO, however, in his order treated a further sum of Rs.64,904 as forming part of entertainment expenditure under s. 37(2A) of the Act being expenditure incurred on tea, coffee, etc. served to the visitors., Aggrieved by the said disallowance, the assessee took up the matter in the appeal before the CIT(A). The learned CIT(A), however, upheld the disallowance in view of the insertion of Explan. 2 below s. 37(2A). Of the Act. 3. The assessee is aggrieved and has come up in appeal before us contending that the learned CIT(A) erred in upholding the ITO's finding. Shri Dinesh Vyas, learned counsel appeared for the assessee and Shri M. Subramanian, learned Departmental Representative appeared for the Reve....
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....d that since good hotels were not available in the factory town of Jamshedpur and the remote mines, the company was required to maintain accommodation for the purpose of its own business and the accommodation maintained was an integral part of its factory buildings to which the provisions of s. 37(4) have no application. The ITO rejected the claim on the ground that the accommodations were also made available to outsiders and as such the provisions of s. 37(4) were attracted. 5. In the appeal before the first appellate authority it was claimed that the maintenance of these buildings was an absolute business necessity and was an integral part of the Company's business set up without which it would find great difficulty in runnings its oper....
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....e Act: (i) CIT vs. Orient Paper Mills Ltd. (1987) 65 CTR (Cal) 125 : (1988) 171 ITR 181 (Cal). (ii) CIT vs. Parshva Properties Ltd. (1986) 53 CTR 151 : (1987) 164 ITR 673 (Cal). Alternatively it is submitted that in the case of the assessee, even if any disallowance is to be made, the disallowance should be limited to maintenance of guest house and that part of expenditure for running the guest house should not be included as held by the Tribunal in the case of M/s Tata Engineering & Locomotive Co. Ltd. in I.T.A. No. 6087 (Bom)/1986. Shri Dinesh Vyas further submitted that in view of the provisions of s. 37(4) of the Act and the non-obstinate clause therein, such expenditure as allowable under ss. 30 to 36 would not come within the pu....
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....TO (1989) 22 Taxman 117 (Bom), it is submitted that the claim of deduction of guest house expenses was not admissible in working out the business income and was rightly disallowed by the learned CIT(A). 8. We have carefully considered the rival submissions in the light of the material placed on our record and ratio of the decisions cited before us. From careful reading of the provisions of the Act, it appears that the provisions of sub-s. (5) of s. 37 are wide enough to cover any accommodation by whatever name called maintained, hired, reserved or otherwise arranged by the assessee for the purpose of providing lodging or boarding and lodging to any person (including any employee or, where the assessee is a company, also any director etc.)....
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....ally relevant should be admissible. Following the above principle enunciated by the Hon'ble Supreme Court, we have to hold after the insertion of sub-s. (5) of s. 37, there is no scope for excluding any accommodation maintained by whatever name called from the application of sub-s. (4) of the said section. The decisions relied upon by the learned counsel of the assessee did not take into account sub-s. (5) of s. 37. Therefore, they are not relevant for the year under consideration. We hold accordingly. Respectfully following the decision of the Tribunal in the case of Dandeli Ferro Alloys (P) Ltd. vs. ITO, we also hold that in view of s. 37(5) inserted by the Finance Act, 1983 with retrospective effect from 1srt April, 1979, which would be ....
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....ause "Notwithstanding anything contained in sub-s. (1)......" which of necessity must relate to expenditure allowable under sub-s. (1) of s. 37 of the Act and no other provisions. This being so and the assessee's case, as stated by us above, not falling to be considered under s. 37(1) of the Act, we are in agreement with the view taken by the Tribunal that the deduction in respect of rent for the guest house being allowable and allowed under s. 30 and the expenses on repairs and polishing and of furniture amounting to Rs.1,603 being allowable and allowed under s. 31 of the Act could not be disallowed under the provisions of sub-s. (3) of s. 37 of the Act or rules made thereunder." Since the assessee in this case claimed that part of the e....