COMMISSIONER OF INCOME TAX Vs. SUPREME MOTORS P LIMITED
LAWS(DLH)-1983-4-29
HIGH COURT OF DELHI
Decided on April 19,1983

COMMISSIONER OF INCOME TAX Appellant
VERSUS
SUPREME MOTORS (P.) LTD. Respondents


Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. NEW BANK OF INDIA LIMITED [LAWS(DLH)-1992-11-67] [REFERRED TO]


JUDGEMENT

S.RANGANATHAN, J. - (1.)THIS is an income -tax reference relating to asst. year 1972 -73. Supreme Motors (P.) Ltd., the assessee -respondent, claimed, inter alia, a sum of Rs. 7,359 as a deduction in the computation of its business income. The above expenditure was claimed as sales promotion expenses. The ITO found that in the earlier year the assessee had claimed only Rs. 3,454. He observed that the expenditure claimed was in the nature of entertainment expenditure and disallowed the same.
(2.)ON appeal it was contended on behalf of the assessee that the amount of Rs. 7,359 had been spent on supplying tea and cool drinks to customers and employees at head office, branch office and at the workshop. The AAC observed that the amount spent on tea and cool drinks supplied to employees had not been indicated. Expenditure on provision of tea and cool drinks to customers, in his opinion, was in the nature of entertainment expenditure. Following a decision of the Allahabad High Court in Brij Raman Dass & Sons vs. CIT 1975 CTR (All) 223 : (1976)104 ITR 541, he upheld the disallowance made by the ITO.
When the matter came before the Tribunal, it referred to the decision of the Gujarat High Court in CIT vs. Patel Brothers & Co. Ltd. (1977) 106 ITR 424, and deleted the addition. Thereupon, on the application of the CIT, the following question has been referred to us for decision:

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the amount of Rs. 7,359 was not in the nature of entertainment expenditure within the meaning of S. 37(2B) of the INCOME TAX ACT, 1961 ?"

(3.)ON behalf of the applicant it is submitted that the expenditure incurred on the provision of tea and cool drinks to customers should be treated as entertainment expenditure. Strong reliance is placed on the decisions of the Allahabad High Court in Brij Raman Dass & Sons case (supra), and of a Full Bench of the Punjab High Court in the case of CIT vs. Khem Chand Bahadur Chand (1981) 23 CTR (P&H) 319 : (1981) 131 ITR 336.
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