- (1.) This income-tax reference is directed against the order dt. 20th Dec., 1980 passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (in short 'Tribunal') for the asst. yr. 1974-75. The Tribunal referred following questions of law: (1) Whether on the facts and in the circumstance of the case, the Tribunal was justified in deleting the disallowance of Rs. 4,250 made by the ITO on account of entertainment expenditure? (2) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the receipt of Rs. 1,67,189 is to be treated as 'business income' instead of income from speculation business. The facts, necessary for disposal of this reference, are that the respondent-assessee a limited company was carrying on the business of production of vegetable ghee and oil and simultaneously also manufacturing its own commodities out of tin plates. A return was submitted by the respondent-assessee declaring a loss of Rs. 44,05,060 on 31st Aug., 1974 which was revised on 30th Oct., 1976 declaring a loss of Rs. 44,05,888. Notices were issued and during the course of hearing the AO required details on various issues on which the return was submitted. Facts and decision on question No. 1:
(2.) Insofar as the question of disallowance of Rs. 4,250 out of office expenses is concerned it was claimed that it was spent on crockery, tea, coffee, dry fruits, snacks, cold drink, pan, cigarettes etc. and it was essentially a business expenditure spent for business expediency and customary in nature for the guests and customers coming at the factory as also office of the respondent-assessee and thus allowable. However, the AO was of the view it is in the nature of entertainment and thus disallowed the amount holding it by way of entertainment. In first appeal the learned AAC also did not accept the contention of the respondent-assessee, however, the Tribunal held the expenditure to be allowable by holding that the expenditure claimed was nominal, reasonable, routine and customary in nature and, therefore, it was allowable and is not in the nature of entertainment.
(3.) Mr. J.K. Singhi, learned senior advocate assisted by Mr. Anuroop Singhi learned counsel for the Revenue submitted that the Tribunal erred in holding the said expenditure in routine when the expenditure was purely in the nature of entertainment and entertainment expenditure was disallowable and accordingly submitted that the finding of the Tribunal on this deserves to be reversed.;