- (1.) AS a result of the directions given by this Court under S. 256(2) of the INCOME TAX ACT, 1961, the Tribunal has stated the case and referred to this Court for its decision, the following question of law, namely : " Whether, on the facts and in the circumstances of the case, the Tri bunal was justified in law in holding that the messing expenses incurred for supply of bare meal to the customers and constituents is entertain ment expenditure and is not allowable under S. 37(2B) of the IT Act, 1961 ? "
(2.) THE material facts are these. The relevant assessment years are 1975 -76 and 197677 The assessee is a partnership concern carrying on the business of commission agents. It deals in cotton. The question for decision is whether the expenditure incurred by the assessee in the supply of bare meals to its customers and constituents is an allowable expenditure under S. 37(2B) of the IT Act, 1961. The assessee claimed deduction under this head for both the assessment years. The Tribunal allowed part of the deduction claimed. Aggrieved by the partial dis allowance of the expenditure to this extent, the assessee applied to the Tribunal for a reference under S. 256(1) of the IT Act, which was refused. Accordingly, the assessee filed an application in this Court under s. 256(2) of the Act in which a direction was given, resulting in the aforesaid question being referred to this Court for its decision. In respect of the same assessee and on the same facts, a prior reference relating to some other assessment years was decided in the assessee's favour, holding that the whole of this expenditure has to be allowed as a deduction treating it to be business expenditure. That decision was Pratap Cotton Trading Co. vs. CIT (1985) 49 CTR (Raj) 41:(1986) 159 ITR 926 (Raj). Following that deci sion, this reference also has to be answered in favour of the assessee. The aforesaid question is, therefore, answered as follows : "The Tribunal was not justified in holding that the messing expenses incurred for supply of bare meals to the customers and the constituents is not business expenditure and, therefore, not a permissible deduction under S. 37(2B) of the INCOME TAX ACT, 1961."
(3.) THE parties shall bear their own costs.;