D.K. Kapur, J.
1. The following question has been referred to us by common statement of case for the assessment years 1972-73 and 1973-74 :
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the expenses in providing tea, coca cola and food to the customers of the assessed were the nature of entertainment expenditure and were, thereforee, disallowable under section 37(2B) of the Income-tax Act, 1961 ?'
2. The assessed in question is a firm engaged in the business of artiest in foodgrains. The business of the assessed is not very extensive. The total arhat receipts for the two years were Rs. 1,02,721 and Rs. 1,14,541, respectively. In the profit and loss account, the assessed claimed Rs. 13,791 in the first year and Rs. 19,979 in the second year as miscellaneous expenses. Out of these, the Income-tax Officer disallowed Rs. 10,000 in the first year and Rs. 13,791 in the second year as being expenses on cold drinks, tea, food, etc., provided to the constituents on the ground that they were entertainment expenditure not allowable under section 37(2B).
3. The Appellate Assistant Commissioner on appeal allowed the expense as being customary expenditure on messing and expenses on expiries and these could not be termed as 'entertainment expenditure' under section 37(2A) of the Act.
4. There was an appeal by the Department to the Tribunal where reliance was placed on a decision of the Allahabad High Court in the case of Brij Raman Dass & Sons v. CIT  104 ITR 546. Relying on this judgment, the Department's appeal was allowed. But, there was a direction that the Income-tax Officer should restrict the disallowance to only specific items which were spent on food, soft drinks and other expenses which could be termed as 'entertainment expenses'.
5. Before us a number of judgments were cited showing that there had been a considerable divergence of view between the High Courts on the question of 'entertainment expenditure' and this divergence had been followed by a retrospective amendment of the Income-tax Act, 1961, the introduction of Explanationn 2 in section 37(2A) of the Act. That Explanationn reads as follows :
'Explanation 2. - For the removal of doubts, it is hereby declared that for the purposes of this sub-section and sub-section (2B), as it stood before the let day of April, 1977, 'entertainment expenditure' including expenditure on provision of hospitality of every kind by the assessed to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessed to his employees in office, factory or other place of their work.'
6. It is interesting that this amendment was made by the Finance Act, 1983, with retrospective effect from 1st April, 1976. In other words, after 1st April, 1976, hospitality expenses have also to be treated as 'entertainment expenses'. But, we are dealing with the assessment years 1972-73 and 1973-74 to which years the Explanationn does not apply.
7. We had previously had occasion to deal with the same problem in ClT v. Supreme motors(P) Ltd. : 147ITR48(Delhi) . The same case of Brij Raman Dass & Sons v. CIT : 104ITR541(All) , decided by the Allahabad High Court and ClT v. Khem Chand Bahadur Chand  131 ITR 33, the Full Bench decision of the Punjab High Court were also cited. At the same time, other cases taking a different view have also been referred to by us. We decided that it was not necessary to give any final opinion on the controversial issue as to whether hospitality expenditure was 'entertainment expense'
8. We then said (page 50 of 147 ITR) :
'In our view it is unnecessary to pronounce any final opinion on this controversial issue for the purposes of the present reference. A perusal of the decisions clearly shows that to a considerable extent, the question is one of degree and fact. In the present case, we have an assessed which is carrying on business of sale of TMB vehicles and their accessories and also running a workshop for the same. The sales of the assessed during the previous year in question amounted to Rs. 3.28 crores. The return filed by the assessed showed a net income of Rs. 10.271 lakhs. The sales promotion expenses claimed by the assessed amounted to Rs. 7,359 which is very insignificant and paltry amount in the context of the magnitude of the assessed's business. We have mentioned earlier that before the Appellate Assistant Commissioner, the assessed contended that this expenditure had been incurred on the supply of tea and cool drinks to customers as well as to the staff of the assessed at the various establishments run by it...'
9. We finally held that this was a matter of degree and the point should not be stretched to the extent of disallowing petty expenses.
10. In the present case, the expenses claimed are certainly more as compared to the total turnover. But, it is not very clear as to whether this was spent on the staff or not. In the assessment order for 1972-73, the Income-tax Officer did not say to whom this coca cola, tea and food were supplied, but in the assessment order for 1973-74, he stated that Rs. 13,791 was disallowed as being food and other miscellaneous expenses incurred on expiries. Before the Appellate Assistant Commissioner it was stated that it was a trading practice to provide food to the purchasers who came to the place of business from various places.
11. In the Tribunal's order, there was a reference to the orders of the Income-tax Appellate Tribunal where various Benches in Delhi had taken the view that a trader carrying on commission business was obliged by trade practice to provide food and refreshment to customers.
12. It must be recalled that artiest of Delhi exist because of the large wholesale market in cloth goods and they earn a small commission on the sales. The purchasers are usually people from out-station, so there is bound to be some expense in relation to food or cool drinks or tea, etc., supplied to them. This type of customary expenditure is expected from the artiest as part of the business operation. The commission agency business can, thereforee, be treated as involving a kind of customary practice to serve beverages by way of hospitality. The moot question is whether this can be called as 'entertainment expenditure'. This would depend on whether this expense can be described as for purposes of entertaining the purchasers or as part of the business operation of selling cloth in the wholesale market. We think, it is unnecessary to decide whether it is 'entertainment expense' or not, because the Legislature itself has clarified that from April 1, 1976, hospitality expenses are to be treated as 'entertainment expenditure'. It would follow that this type of expenditure before April 1, 1976, could be treated as a permissible deduction. We would, thereforee, hold that in spite of the quantum being relatively high, the expense could not be treated as 'entertainment expenditure' in the circumstances of this particular line of business.
13. We would accordingly answer the question referred to us in the negative, in favor of the assessed and against the Department, but leave the parties to bear their own costs.