COMMISSIONER OF INCOME TAX Vs. EXPO MACHINERY LIMITED

JUDGEMENT

(1.) THE petitioner seeks reference of the following question :

(2.) APART from the fact that, in respect of Usha International Ltd., the petition under S. 256(2) of the IT Act was dismissed by this Court, we may note that the essential question is whether the expenditure of 35 per cent of Rs. 1,55,003 was hit by the provisions of S. 37(2A) of the IT Act. The CIT has found as a fact that, along with the customers, the employees of the company had also taken food. He, however, did not allow any expenditure because he was of the opinion that the expenditure on food and beverages was not incurred in the factory premises but was incurred in the hotels. The Tribunal has also found as a fact that the employees of the company had taken eatables along with the guests and customers of the company and the expenditure which is incurred on food, etc., of the employees is expressly excluded by virtue of the provisions of S. 37 (2A), Explanation 2. It is a finding of fact as to whether any part of the expense of Rs. 1,55,003 was incurred on the food, etc., of the employees. This finding of fact has been answered in favour of the assessee. It is necessary in such a case that certain amount of estimate has to be resorted to. The Tribunal has estimated such expense as 35 per cent, which cannot be said to be unreasonable and, in any case, this estimate is also a question of fact. The expense on the eatables of the employees which is excluded from the purview of S. 37(2A), includes expense which is incurred, inter alia, at the place of work of the employees. When the employees are having their food along with the company's customers in a hotel, in discharge of their official duties, the employees are taking food while at work because it is their work and duty to entertain the customers of the company. Therefore, wherever any expenditure is incurred on the food and beverages of the employees at the time when they are working, would obviously be excluded from the purview of S. 37(2A).

(3.) THE answer to the question proposed, in one sense, is a question of fact and, in another sense, is self -evident. Dismissed.