J.V. Gupta, J.
1. The assessee-firm is a dealer of M/s. Ashok Leyland Ltd. for Jammu and Kashmir. In September, 1969, the assessee received a letter from Shri M. D. Kapoor, sales director of M/s. Ashok Leyland, Madras, to the effect that it had been decided to hold the ' Main Dealers Conference 1969 ' at Srinagar some time in October 1969. It was further stated by Shri M. D. Kapoor that he would require 8/10 cars for the delegates and that he would appreciate if the assessee could make arrangements for the same. It was further suggested by Shri Kapoor that the assessee should host a dinner for the delegates on 14th October, 1969, and that M/s. Ashok Leyland would compensate the assessee in some other way for the expenditure incurred by it. In pursuance of this letter, the assessee spent a sum of Rs. 13,135 on the Ashok Leyland Dealers' Conference in respect of taxi bills and dinner, etc. In addition to this expenditure, the assessee also spent the sum of Rs. 4,543 on providing tea, etc., to its customers and members of the staff. Holding that the expenditure of Rs. 17,678 was in the nature of entertainments, the ITO disallowed the same while passing order for the assessment year 1971-72. On appeal, the AAC held that the expenditure of Rs. 13,135 was allowable, as the same had been incurred for business purposes. As regards the expenditure of Rs. 4,543, he allowed the same to the extent of Rs. 1,543, on the ground that the same related tothe provision of tea and food, etc., to the employees. Thus, the total amount allowed by him was Rs. 14,678. In second appeal by the department, the Tribunal held as under :
' We have gone through the record and heard the learned representatives of the parties. In our opinion, the decision of the Appellate Assistant Commissioner is sound and the same calls for no interference. The facts of the case indicate that the assessee did not voluntarily spend the amount of Rs. 13,135 on the Ashok Leyland Dealers' Conference. Since no dealer could afford to offend the manufacturers, the assessee had no choice, but to arrange for the cars and the dinner, etc., for the delegates, as desired by Shri M. D. Kapoor, sales director of M/s. Ashok Leyland, Madras. It is also on record that the manufacturers, who were pleased with the assessee, provided certain number of chassis to it on old rates even though there had been some increase in the prices. In our opinion, the expenses incurred by the assessee were not in the nature of entertainment expenses and that the same were necessary on the ground of commercial expediency and business considerations. We, accordingly, agree with the view taken by the Appellate Assistant Commissioner that the expenses amounting to Rs. 13,135 were incurred by the assessee wholly and exclusively for the purpose of its business. The same are, therefore, allowable. '
2. At the instance of the revenue, the Tribunal has referred the following question for the opinion of this court :
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenses of Rs. 13,135 were allowable under Section 37 of the Income-tax Act, 1961 '
3. It has been argued on behalf of the revenue that in view of Section 37(2A) of the Income-tax Act, 1961 (hereinafter referred to as ' the Act '), the sum of Rs. 13,135 incurred as business expenses by the assessee on the conference were not allowable as such under Section 37(1) as they fall within the purview of expenditure in the nature of entertainment. Section 37(2A) reads as under :
' Notwithstanding anything contained in Sub-section (1) or subsection (2), no allowance shall be made in respect of so much of the expenditure in the nature of entertainment expenditure incurred by any assessee during any previous year which expires after the 30th day of September, 1967, as is in excess of the aggregate amount computed as hereunder :--...'
4. According to the learned counsel, the word ' entertainment ' should be taken to mean an hospitality of any kind extended by the assessee directly in connection with his business or profession, and, therefore, the expenditure incurred as such by the assessee would clearly fall within the description ' entertainment ' expenditure. Thus, according to him, the Tribunal had erred in holding that the expenses incurred by the assessee were not inthe nature of entertainment expenses and the same were necessary on the ground of commercial expediency and business considerations. On behalf of the assessee,. these contentions were sought to be repelled by urging that the question whether in a given case the expenses are in the nature of entertainment expenses or not, would depend upon the facts and circumstances of each case and no hard and fast strait-jacket formula or test can be laid down so as to answer all the contingencies. According to the learned counsel for the assessee, it would depend, inter alia, on the nature and type of business, item of entertainment, place of entertainment and tradition and habits of the people of the area where the assessee is carrying on his business. In any case, it was contended that hospitality shown on account of obligation of business arising as a result of an express or implied contract or arising on account of the long standing custom of a trade, business or profession, cannot amount to entertainment and acts done in discharge of such obligations cannot be included and covered in the term ' entertainment ' in Section 37(2A) of the Act. It was further submitted that in the present case, the assessee was under business obligation to make proper arrangements for the cars and the lunch, etc., for the delegates as desired by the sales director of M/s. Ashok Leyland, Madras, and, therefore, the expenses incurred by him were not in the nature of entertainment expenses, but the same were necessary on the ground of commercial expediency and business considerations.
5. After hearing the learned counsel for the parties, we are of the opinion that this contention of the department that entertainment should be taken to mean hospitality of any kind extended by the assessee in connection with his business or profession is not correct. No doubt entertainment is hospitable treatment of guests and every act of entertainment includes hospitality. But that would not warrant the converse position to be correct and every hospitality would not constitute entertainment. We find that the Gujarat High Court in CIT v. Patel Brothers & Co. Ltd. : 106ITR424(Guj) has discussed the meaning of the term 'entertainment' given in various dictionaries and, after reproducing the same, has come to the conclusion that (p. 434) :
' It is, therefore, clear to us that the dictionary meaning of the term ' entertainment ' is to receive and treat with hospitality, which broadly means receiving and entertaining strangers or guests in a friendly, generous and liberal way. The term ' entertainment', in the context of the Income-tax Act, on its true construction and meaning, would include the acts or practice of receiving and entertaining strangers and friends in a friendly, generous and liberal way. These acts may consist of providing, inter alia, a formal or elegant meal, a banquet and being hospitable in providing for the wants of a guest in a liberal and generous manner. If the actof entertaining is on a lavish and a grand scale involving wasteful expenditure, it would, no doubt, amount to entertainment. On the other hand, if the acts or practice of being hospitable in the sense of providing meals, drinks or other wants of persons entertained, whether they may be employees, workmen or officers, servants or agents in the service of an assessee, as an express or implied condition of service, they would not amount to acts of entertainment. Similarly, if the acts or practice of being hospitable in the sense of providing meals, drinks or satisfying any other wants of guests, whether they are friends, strangers or customers, as a part and parcel of express or implied terms and conditions of business, trade or profession, or on account of long-standing custom in such trade, business or profession, they would not, in our opinion, amount to acts of entertainment. It is only in the area lying between these two termini that the difficult questions arise, and as regards acts falling in such area we are of the opinion that we should adopt the broad dictionary meaning of the term ' entertainment ' which we have indicated above. We think that the revenue was right when it was contended on its behalf that entertainment is hospitable treatment of guests and every act of entertainment includes hospitality. But, in our opinion, that would not warrant the converse position to be correct and every hospitality would not constitute entertainment. Hospitality shown on account of obligation of the business arising as a result of an express or implied contract or arising on account of the longstanding custom of a trade, business or profession, cannot amount to entertainment and acts done in discharge of such obligation cannot be included and covered in the term 'entertainment' without violence to language.'
6. Thus, in the present case, we find that the hospitality shown by the assessee to the delegates of the conference was on account of business compulsion, particularly in view of the nature of the business of the assessee, i.e., being dealer of M/s. Ashok Leyland, Madras. The Tribunal is right in observing that since no dealer could afford to offend the manufacturers, the assessee had no choice, but to arrange for the cars, etc., for the delegates, as desired by Shri M. D. Kapoor, sales director of M/s, Ashok Leyland, Madras. But the question that still remains to be answered is whether in the present case the amount incurred on meals, i.e., lunch, etc., which is included in the total amount of expenditure, was also spent on account of business compulsion or was it a voluntary one Taking into consideration the definition of the word ' entertainment ' and the conclusions given above by the Gujarat High Court, we are of the opinion that the amount spent on meals, etc., will be covered by the said definition. Such an amount spent was nothing but a voluntary expense on the part of the assessee in order to entertain the delegates. Under the circumstances, the amount thus spent on meals cannot be said to be under any business obligation orcompulsion as such. We do not find that such an amount incurred on lunch, etc., was either customary or was on account of any business obligation, particularly keeping in view the nature of business carried on by the assessee. From the order of the ITO, we find that some amount was incurred for expenses on one lunch to the delegates of the conference, but it is not clear how much amount was spent on the lunch alone. Thus, the amount which may be found by the Tribunal as having been incurred on lunch, etc., will be treated as an expenditure on entertainment; whereas the balance will be expenditure for business considerations and not for entertainment purposes.
7. In this view of the matter, we are unable to answer the question as the amount of Rs. 13,135 includes the expenditure on lunch, which has been held to be entertainment and thus not allowable. We, therefore, remit the case to the Tribunal to proceed to decide the matter in accordance with law. There will be no order as to costs.
Bhopinder Singh Dhillon, J.
8. I agree.