N.C. Sharma, J. - (1.) THIS order will dispose of three D. B. Civil Miscellaneous Applications Nos. 332 of 1988, 331 of 1988 and 329 of 1988 filed by the Commissioner of Income-tax, Jaipur, under Sections 151 and 152 of the Code of Civil Procedure by a common order as all these three applications involve a common question of law.
(2.) M/s. Globe Transport Corporation carried on a business of transportation. With respect to the previous year ending Deepawali Samvat 2032 relevant to the assessment year 1976-77, it filed return of its income disclosing an income of Rs. 94,660. The Income-tax Officer, 'B' Ward, Jaipur, passed an assessment order on February 19, 1979. The assessee had debited an amount of Rs. 19,485.28 under the head "Expenses" in its profit and loss account. The account showed that these expenses had been incurred on tea, betel, cigarettes, etc. The Income-tax Officer disallowed an amount of Rs. 15,000 on estimate treating it as expenses on entertainment. On appeal, the Commissioner of Income-tax (Appeals), Jaipur, by his order dated June 18, 1979, reduced the additions made by the Income-tax Officer on account of entertainment expenditure to Rs. 10,000 from Rs. 15,000. The assessee filed a further appeal before the Income-tax Appellate Tribunal and before the Tribunal, it was contended on its behalf that the expenditure in question was incurred in providing tea, cigarettes, pan, etc., to drivers, agents, customers and employees and that these expenses were customary and incidental to the business. The Tribunal held that these expenses were incurred in providing drinks, tea, coca cola, etc., to the constituents, customers and employees of the assessee and that they were incidental to the business. It was held by the Tribunal that such expenditure cannot be said to be in the nature of entertainment. On an application being made by the Commissioner of Income-tax, the Income-tax Appellate Tribunal, Jaipur Bench, by its order dated July 1, 1981, referred the following question of law to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenses of Rs. 10,000 are not in the nature of entertainment expenditure ?" M/s. Shambhu Dayal Ram Pal was a partnership firm carrying on a business at Chomu in sugar, jaggery, khand and arat. In relation to the accounting period ending Deepawali relevant to the assessment year 1978-79, it declared an income of Rs. 85,234 in its return. The case of the assessee was that the up country constituents visited its business premises and that it was customary for the assessee to provide food, tea, cool drinks, snacks, etc., to them. The assessee claimed a total expenditure of Rs. 14,950 as expenses incurred on these items for its constituents. The Income-tax Officer, J-Ward, Jaipur, by his order dated October 31, 1979, disallowed a sum of Rs. 9,900 in terms of Section 37(2A) of the Income-tax Act as, in his opinion, such expenditure was in the nature of entertainment. On appeal, the Appellate Assistant Commissioner, '13' Range, Jaipur, by his order dated March 21, 1980, held that these expenses were customary in nature in the assessee's line of business and did not constitute entertainment expenses within the meaning of Section 37(2A) of the Income-tax Act and, therefore, allowed the deduction of the amount of Rs. 9,900 from the assessee's income. On appeal by the Revenue, the Income-tax Appellate Tribunal, Jaipur Bench, by its order dated March 26, 1981 upheld the order of the Appellate Assistant Commissioner. On an application being moved by the Commissioner of Income-tax, Jaipur, the Income-tax Appellate Tribunal, Jaipur Bench, by its order dated March 3, 1982, referred the following question of law to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expenses of Rs. 9,900 incurred on providing food, tea, coffee, etc., to the assessee's constituents are not in the nature of entertainment expenditure under Section 37(2B) of the Income-tax Act, 1961 ?" So far as the third assessee, M/s. Rameshwur Dayal and Co., is concerned, it was a registered firm and derived its income from arat in gur and khandsari. In relation to the accounting period Deepawali Samvat 2032 relevant to the assessment year 1976-77, the assessee claimed deduction of a total amount of Rs. 15,009 as "choka expenses" (i.e., mess expenses) on the ground that they were incurred to earn "arat". According to him, the adatias came from U.P. to effect sales of goods and he had to provide amenities to "aratias". The Income-tax Officer, "C" Ward, Jaipur, disallowed the deduction of this amount having regard to the provisions contained in Section 37(2B) of the Income-tax Act, 1961. On appeal, the Commissioner of Income-tax (Appeals) upheld the order of the Income-tax Officer in this regard. He held that, in view of the decision of the Allahabad High Court in Brij Raman Dass and Sons v. CIT [1976] 104 ITR 541, the Income-tax Officer was right in holding that these expenses were in the nature of entertainment expenditure which was not allowable according to the provisions of Section 37(2B) of the Income-tax Act, 1961. The assessee went in further appeal before the Income-tax Appellate Tribunal which was allowed by the Tribunal. The Tribunal held that the expenditure incurred by the assessee was by way of providing hot, cold drinks, lunch, etc., to its customers which was customary in nature in the line of business carried on by the assessee and. it did not constitute "entertainment expenditure". On an application being moved by the Commissioner of Income-tax, the Tribunal, by its order dated April 29, 1981, referred to this court the following question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that messing expenses of Rs. 15,000 do not constitute entertainment expenditure within the meaning of Section 37(2B) of the Income-tax Act, 1961 ?" All these three references were registered in this court as D. B. Income-tax References Nos. 135 of 1981, 79 of 1982 and 85 of 1981, respectively, and were answered by similar orders passed on 2nd, 3rd and 6th May, 1988. This court held : "Following these decisions, it has to be held that these expenses are allowable as business expenditure under Section 37(213) of the Income-tax Act, 1961. The Tribunal's view in the assessee's favour is, therefore, justified. Consequently, the reference is answered in the affirmative, in favour of the assessee and against the Revenue by holding that the Tribunal's view is justified." Thereafter, on July 4, 1988, the Commissioner of Income-tax, Jaipur, filed the present three D. B. Civil Miscellaneous Applications Nos. 332 of 1988, 331 of 1988 and 329 of 1988, under Sections 151 and 152 of the Code of Civil Procedure with the prayer to rectify/modify/review this court's orders dated 2nd, 3rd and 6th May, 1988, in the above three references and it may be answered in them that the expenses to the extent of Rs. 5,000 only are allowable and the balance expenses are not allowable to the assessee as deductions.
(3.) IT was urged by Mr. V. K. Singhal, appearing for the Revenue, that the provisions of Section 37(2A) as inserted by the Taxation Laws (Amendment) Act, 1967, were not noticed and considered at the time of deciding the three references whereby on the first Rs. 10,00,000 of the profits and gains of the business, the maximum amount allowable as entertainment expenditure was only Rs. 5,000. Moreover, Explanation 2 below Section 37(2A) was inserted by the Finance Act, 1983, with retrospective effect from April 1, 1976, to declare the meaning of "entertainment expenditure" as including expenditure on provision of hospitality of every kind by the assessee to any person excluding expenditure on food or beverages provided by the assessee to his employees in the office, factory or other place of their work. On this basis, it was urged that the assessee was entitled to the relief of Rs. 5,000 only and that the excess expenditure allowed by the Tribunal is liable to be disallowed in view of the Second Explanation read with Section 37(2A) of the Act. Learned counsel urged that this court may, accordingly, rectify or modify its orders answering the three references accordingly. The main question which arises for determination is that the references under Section 25G(1) having already been answered by this court in the affirmative, can this court, under Section 151 or Section 152, C. P. C., rectify, modify or review its answer even if there is an error in the answer on account of the fact that the provision contained in Section 37(2A) with Explanation 2 thereto was not taken into consideration. It is clear from the provisions of the Income-tax Act, 1961, that the Code of Civil Procedure as such does not apply to the proceedings under the Income-tax Act, 1961. Section 131 of the Income-tax. Act would go to show that, for a limited purpose of discovery and inspection, enforcing the attendance of any person including any officer of a banking company and examining him on oath, compelling the production of books of account and other documents and issuing commissions, the Assessing Officer, Deputy Commissioner (Appeals), Deputy Commissioner, Commissioner (Appeals) and Chief Commissioner or Commissioner have, for the purposes of the Act, been given the same powers as are vested in a court under the Code of Civil Procedure when trying a suit. So far as reference to the High Court is concerned, all that is provided in Section 259 of the Income-tax Act is that, when any case has been referred to the High Court under Section 256, it shall be heard by a Bench of not less than two judges of the High Court, and shall be decided in accordance with the opinion of such judges or of the majority, if any, of such judges. Then, it is provided in Section 260 that the High Court, upon hearing any such case, shall decide the questions of law raised therein, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal of the court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. ;