COMMISSIONER OF INCOME TAX Vs. SUPREME MOTORS P LIMITED
HIGH COURT OF DELHI
COMMISSIONER OF INCOME TAX
SUPREME MOTORS (P.) LTD.
Click here to view full 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.
Copyright © Regent Computronics Pvt.Ltd.