COMMISSIONER OF INCOME TAX vs REGAL THEATRE

Arijit Pasayat, C.J.

At the instance of the revenue, the following question has been referred for opinion of this court u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) by the Tribunal, Delhi Bench-D :

"Whether, on the fact and in the circumstances of the case, the Tribunal was correct in law in holding that the amounts of Rs. 28,474 and Rs. 2,738 aggregating Rs. 31,212 did not represent the entertainment expenditure contemplated u/s 37(2B) of the Income Tax Act, 1961 ?"

Factual position in a nutshell is as follows :

The assessed incurred an expenditure of Rs. 42,040 on different items for the assessment year 1974-75 for which the relevant previous year ended on 31-10-1973. The Income Tax Officer disallowed the entire amount holding it to be of entertainment nature. Disallowance was confirmed by the Appellate Assistant Commissioner. The assessed carried the matter in appeal before the Tribunal. The Tribunal was of the view that a sum of Rs. 5,859 incurred on the purchase of beer and wine and Rs. 4,979 incurred by the partners to meet their club bills were clearly disallowable. So far as the other items are concerned, they were held to be allowable and it was also held that provisions of section 37(2B) of the Act has no application to the case. On being moved for reference, the question as set out above has been referred for opinion of this court.

We have heard the learned counsels for the parties.

In view of the decision of the Apex Court in CIT v. Patel Bros. & Co. Ltd. : [1995]215ITR165(SC) , our answer to the question referred is in the affirmative, in favor of the assessed and against the revenue.