Sir Shadi Lal Sugar and General Mills vs Commissioner of Income Tax

Prakash Krishna, J.

This is a reference u/s 256(2) of the Income Tax Act.

The following question of law has been referred to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the provisions of section 37(2B) were applicable to the expenses of Rs.7,959 incurred by the assessee ?"

The Income Tax Officer while making the assessment for the assessment year 1972-73 disallowed the entertainment expenses being not admissible u/s 37(2B) of the Income Tax Act. This order was affirmed upto the stage of Tribunal. The Tribunal in paragraph 12 of its order has observed that the disallowance of Rs. 7,959 by the Income Tax Officer is legally correct in view of the decision of the Allahabad High Court in the case of Brij Raman Dass and Sons Vs. Commissioner of Income Tax, . The aforesaid judgment has been disapproved by the Supreme Court in the case of CIT v. Patel Bros. & Co. Ltd. : [1995]215ITR165(SC) . The Supreme Court has held that entertainment expenditure is allowable expenditure.

in view of the aforesaid pronouncement by the Supreme Court, we answer the above question in the negative, that is in favour of the assessee and against the department.