- (1.) THIS is a reference under S. 256(1) of the INCOME TAX ACT, 1961, at the instance of the assessee to answer the following question of law: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure incurred by the assessee in serving of tea, coffee, pan, meals, etc., to the customers is in the nature of entertainment expenditure within the meaning of S. 37(2B) of the IT Act, 1961, for the asst. year 1973 -74 ? "
(2.) THE relevant assessment year is 1973 -74, for which the accounting year ended on Diwali, 1972. The assessee was doing the business of commission agency. During the relevant year, he claimed a deduction of Rs. 3,509 as expenditure on tea, coffee, coca cola, etc., and Rs. 5,930 for meals provided to his constituents who visited him in his business premises in connection with the business. This amount was, therefore, claimed as a deduction on account of business expenditure. The ITO disallowed the expenses claimed in its entirety. The assessee preferred an appeal to the AAC who partly allowed the appeal. Thereafter, the assessee as well as the Revenue preferred crossappeals to the Tribunal. The Tribunal allowed the appeal of the Revenue and rejected the appeal of the assessee. Hence, this reference at the instance of the assessee to answer the above quoted question of law.
(3.) THE question referred in the present case is covered by the earlier decision of this Court in Pratap Cotton Trading Co. vs. CIT (1985) 49 CTR (Raj) 41:(1986) 159 ITR 926 (Raj), wherein it has been held that such expenses are not in the nature of entertainment expenses but are within the meaning of " business expenditure ", which is an allowable deduction. Following that decision, the reference has to be answered in the assessee's favour.;