- (1.) ON an application under Section 256(1) of the IT Act, the Tribunal has referred the following questions for our opinion : '(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 1,94,775 by holding that giving gifts and presents does not amount to hospitality and cannot be considered for disallowance as entertainment expenditure ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 1,94,775 by holding that it is not entertainment expenditure despite the fact that in that event the expenditure would have to be treated as that on 'Advertisement' and 'Publicity' and hence disallowable under Rule 6B of the IT Rules, 1962 ?' '(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 1,35,472 by holding that giving of gifts and presents does not amount to hospitality and cannot be considered for disallowance as entertainment expenditure 7, and (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 1,85,472 by holding that it is not entertainment expenditure despite the fact that in that event the expenditure would have to be treated as that on 'Advertisement' and 'Publicity' and hence disaUowable under Rule 6B of the IT Rules, 1962 ?'
(2.) THE assessee -company derives income from sales of cement. The relevant assessment years are 1989 -90 and 1990 -91. During the asst: yr. 1989 -90, the assesses has shown the production of 4,86,260 MT and sales at 4,91,936 MT and in asst. yr. 1990 -91, the assessee has cement production to the tune of 3,71,658 M.T. and sale was 3,66,705 M.T. During the course of assessment proceedings, the AO noticed that assessee has claimed entertainment expenses. Invoking the provisions of Expln. 2 to Sub -section (2A) of Section 37, the AO disallowed Rs. 1,94,775 on account of expenditure on gifts and presents and Rs. 1,89,867 disallowed invoking the same provision in the asst. yr. 1990 -91, The AO further noticed that assessee has claimed the expenses on gifts and presents, 'such as fruits, sweets, dry fruits. The AO was of the view that these expenses are in the nature of entertainment expenses and after insertion of Expln. 2 to Sub -section (2A) of Section 37, part of such expenses are not allowable and he made the aforesaid additions in both the years. In appeal before the CIT(A), the CIT(A) following the decision of this Court in case of CIT v. Green Roadways and CIT v. Yadav Transport Service (1987) 167 ITR 474 , confirmed the view taken by the AO. In appeal before the Tribunal, the Tribunal following its earlier order deleted the additions so made.
(3.) HEARD learned counsel for the parties.;