1986 (4) TMI 98

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....7-78 [previous year ending on 31-3-1977] under the head Sales promotion the ITO disallowed Rs. 78,918, being in his opinion in the nature of entertainment expenditure. On appeal, the assessee restricted the claim under that thread to Rs. 33,848. The Commissioner [appeals] held that out of the said amount of Rs. 33,848, Rs. 5,000 should be treated as entertainment expenses and the balance of Rs. 28....

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.... that the entire amount was spent on entertainment of the tourists and, therefore, deduction of it should not have been allowed. We could not get advantage of hearing the assessee since none appeared for it. 4. In view of restriction placed by sub section (2A) of section 37 on allowability of the entire expenditure on entertainment, a simple plea that it was incurred wholly and exclusively for ....

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....liberal and generous manner". The legislation by inserting Explanation to sub-section (2A) of section 37 by the Finance Act, 1983 with retrospective effect from 1-4-1976 made it clear that 'entertainment expenditure' includes expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of food or beverages or in any other manner whatsoever and wh....

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....rs and makes special decoration on a particular occasion without charging extra money for that, irrespective of any express or implied contract or custom or usage of the trade. Will it be called an expenditure on entertainment ? Will it not be same as a dealer in car giving spare parts to a purchaser of a car, without charging extra money for those parts? It is, therefore, essential to examine whe....