Commissioner of Income Tax vs Kaira District Co-operative Milk Producers Union Limited

M.B. Shah, J.—The Income Tax Appellate Tribunal has referred the following questions u/s 256(1) of the Income Tax Act, 1961 pertaining to the assessment year 1973-74, for our opinion :

"1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has been right in law in holding that the amount of Rs. 26,943 is not disallowable u/s 37(4) of the Act as guest house expenses?

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has been right in law in holding that the amount of Rs. 14,908 being expenses on tea, lunch, etc. cannot be disallowed an entertainment expenses in terms of section 27(2B) of the Act, 1961?

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has been right in law in allowing a deduction of Rs. 21,203 being the contribution made to the Gujarat State Co-operative Union u/s 69 of the Gujarat State Co-operative Societies Act ?"

In our view, all the aforesaid three questions are covered by various decisions of this court.

As regard question No. 1, this court in the case of Commissioner of Income Tax Vs. Kaira Dist. Co-operative Milk Producers Union Ltd., held that, so far as guests house expenses were concerned, the Tribunal has rightly held that the expenditure was incurred out of commercial expediency to meet customary hospitality for providing lunch or dinner to the visitors, employees and technicians who visited the factory. That decision pertains to the previous assessment years between the same parties. Hence, question No. 1 is answered in the affirmative, i.e., in favour of the assessee and against and Revenue.

As regard entertainment expenditure, in the aforesaid case, the court relied upon the decision in the case of Commissioner of Income Tax, Gujarat II Vs. Patel Brothers and Co. Ltd., and answered the question in the affirmative and in favour of the assessee. Hence, question No. 2 is also directly covered by the aforesaid decision and is required to be answered in the affirmative and in favour of the assessee and against the Revenue.

As regard question No. 3, it is covered by the decision of this court in the case of MEHSANA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD. Vs. COMMISSIONER OF Income Tax., . The court held that contribution to the Gujarat Co-operative Educational Fund was allowable as business expenditure.

In the result, all the three questions are answered in the affirmative and in favour of the assessee and against the Revenue. The reference is answered accordingly with no order as to costs.