Commissioner of Income Tax vs Bharat Heavy Electricals Ltd.

Arijit Pasayat, C.J.—The following questions have been referred for the opinion of this court u/s 256(1) of the Income Tax Act, 1961 (in short "the Act"), by the Income Tax Appellate Tribunal, Delhi Bench-C (the "Tribunal" in short) :

"1. Whether, on the facts and in the circumstances of the case and on the interpretation of the provisions of Sub-section (3) of Section 33 of the Act, the Appellate Tribunal was justified to hold that the assessed-company is entitled to the carry forward of development rebate, having remained outstanding in the hands of HEIL which amalgamated with the assessed-company with effect from January 1, 1974 ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the expenditure of Rs. 19,429 incurred by the assessed on serving tea, coffee and light refreshments to the representatives of the customers was not in the nature of entertainment and was allowable as a business expenditure ?"

The dispute relates to the assessment year 1974-75.

The factual aspects need not be noted in detail in view of the fact that while deciding the issue involved in the first question the Tribunal had placed reliance on a decision of the Allahabad High Court in Addl. Commissioner of Income Tax Vs. Vishnu Industrial Enterprises, . The view expressed in the said case was specifically overruled by the Supreme Court in Shri Shubhlaxmi Mills Limited Vs. Additional Commissioner of Income Tax, Gujarat, . Consequentially, we would have answered the question in favor of the Revenue but we find that Section 34(3)(a), as amended by the Finance Act, 1990, has some relevance to the issue, more particularly in view of the fact that the expression "relevant previous year" as stood prior to the amendment has been substituted by the words "any previous year...", to be operative with retrospective effect from April 1, 1962. It would, Therefore, be appropriate for the Tribunal to decide as to the effect of the said amendment and the relevance thereof to the dispute at hand. So far as the second question is concerned, it is squarely covered by the decision of the apex court in CIT v. Patel Brothers and Co. Ltd, : [1995]215ITR165(SC) . The second question is, Therefore, answered in favor of the assessed and against the Revenue.