Ajit K.Sengupta, J. - (1.) At the instance of the Commissioner of Income-tax, Central, three questions of law have been referred to this court under Section 256(1) of the Income-tax Act, 1961. For the assessment year 1964-65, two questions have been referred which are as follows : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the assessee's claim for deduction of Rs. 22,878 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the assessee's claim for deduction of Rs. 11,162."
(2.) The facts relating to the said two questions are that for the assessment year 1964-65, the assessee claimed deduction of Rs. 22,878 in respect of maintenance and running of an accommodation at Renukoot where its aluminium industry is located. The assessee also claimed deduction of Rs. 11,162 in connection with the inauguration of its factory at Renukoot on January 7, 1963. The Income-tax Officer treated the total amount of Rs. 34,030 (Rs. 22,878 + Rs. 11,152) as entertainment expenses. He, therefore, allowed Rs. 10,000 as permissible deduction under Section 37 of the Act and disallowed the balance of Rs. 24,030.
(3.) Before the Appellate Assistant Commissioner, it was submitted on behalf of the assessee that Rs. 22,878 represented the excess expenditure incurred by the assessee over the recoveries made by it from its customers, clients and other visitors who visited Renukoot. It was further submitted that the Income-tax Officer was not justified in treating the aforesaid expenses as entertainment expenses. Agreeing with the submissions made on behalf of the assessee, the Appellate Assistant Commissioner deleted Rs. 24,030 from the total income of the assessee.;