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Commissioner of Income-tax Vs. Bagraj and Company - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 1233 of 1976
Judge
Reported in[1979]117ITR694(All)
ActsIncome Tax Act, 1961 - Sections 37 and 37A
AppellantCommissioner of Income-tax
RespondentBagraj and Company
Appellant AdvocateA. Gupta, Adv.
Respondent AdvocateR.K. Gulati, Adv.
Excerpt:
- .....chandra, c.j.1. the assessee claimed deduction of rs. 2,261 as expenses incurred under the head 'fooding expenses'. the assessee is to provide food to its customers. the aforesaid amount of rs. 2,261 was incurred in the assessment year 1973-74. the ito held that these expenseswere in the nature of entertainment expenses and were not maintainable. on appeal, however, this disallowance was limited to rs. 500. the tribunal agreed with the view of the aac. at the instance of the cit, the tribunal has referred the following question of law for our opinion : 'whether, on the facts and in the circumstances of the case, the claim of the assessee for deduction of rs. 2,261 being expenses incurred under the head 'fooding expenses' was a permissible deduction from the income of the assessment.....
Judgment:

Satish Chandra, C.J.

1. The assessee claimed deduction of Rs. 2,261 as expenses incurred under the head 'fooding expenses'. The assessee is to provide food to its customers. The aforesaid amount of Rs. 2,261 was incurred in the assessment year 1973-74. The ITO held that these expenseswere in the nature of entertainment expenses and were not maintainable. On appeal, however, this disallowance was limited to Rs. 500. The Tribunal agreed with the view of the AAC. At the instance of the CIT, the Tribunal has referred the following question of law for our opinion :

'Whether, on the facts and in the circumstances of the case, the claim of the assessee for deduction of Rs. 2,261 being expenses incurred under the head 'fooding expenses' was a permissible deduction from the income of the assessment year 1973-74?'

2. In Income Tax Reference No. 192 of 1976 (CIT v. Manoo Ram Ram Karan Dass) decided on 2nd May, 1978 [since reported in [1979] 116 ITR 606 (All) ] this court held that such fooding expenses for customers were not permissible deductions.

3. The AAC found that two of the employees of the assessee were paid salary at Rs. 100 and Rs. 150 each per month. They were from Rajasthan and stayed 24 hours in the shop. Since their salaries were low, they were served with food also. Occasionally meals were supplied to the constituents coming from outside. The AAC held that the claim was not supported by proper evidence and details and appeared a little excessive. In this view of the matter, disallowance of Rs. 500 would be quite reasonable. Consequently, the addition was reduced by Rs. 1,761. The Tribunal upheld this view.

4. It is thus apparent that the disallowance is confined to Rs. 500 on the footing that this amount was spent for providing meals to the constituents. The balance is allocable to the food supplied to the employees of the assessee. They were held to be business expenditure. They were not within the purview of the entertainment expenses under Section 37A of the I.T. Act.

5. We, therefore, answer the question referred to us by saying that the claim of the assessee for the deduction of Rs. 2,261 was a permissible deduction to the extent of Rs. 1,761 only. The assessee will be entitled to costs which are assessed at Rs. 200.


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