COMMISSIONER OF INCOME TAX Vs. CENTRAL INDIA BUILDERS

JUDGEMENT

(1.) AT the instance of the CIT, the following two questions have been referred to us for our opinion :

(2.) WE need not set out the facts and circumstances elaborately in which these questions have been raised. Suffice it to say for the present purposes that when these questions were referred to us by the Tribunal, the provision under which the question of admissibility of entertainment expenses arose was as it then stood as Sub S. (2B) of S. 37 of the IT Act. It should be recalled that by S. 10 of the Finance Act, 1970 (19 of 1970), the aforesaid Sub S. (2B) was, inter alia, added w.e.f. April 1, 1970. The said Sub S. (2B) read as under :

(3.) WE have, therefore, to see as to whether the Tribunal was right in concluding that the messing expense could not have been disallowed under S. 37(2B), as it then stood. Though in the statement of the case the facts are not clear, we gather from the order of the CIT (A) that the assessee is a contractor having works at the relevant time at Jabalpur, Bhandak and Hanger and a large number of employees were employed in three sites which were far away from the inhabited places and, therefore, the employees were required to be provided with food and living facilities. We also gather from the order of the CIT (A) that the assessee was claiming on this count an amount of Rs. 49,462 as messing expenses. The CIT substantially allowed this claim by restricting the disallowance to Rs. 3,000. This fact is not controverted by the Department before the Tribunal which was concerned only with the question (as was the CIT (A)) as to whether the amount of Rs. 46,462 which was on account of messing expenses should be allowed or disallowed under S. 37 (2B). In view of the unequivocal provision made in the Explanation that entertainment expenses would not include expenditure on food provided by the assessee to the employees in office, factory or other places of work, we have to answer the question No. 1 in favour of the assessee. We, therefore, answer question No. 1 in the affirmative, i.e., in favour of the assessee and against the Revenue. However, as regards question No. 2, since no appeal was preferred by the assessee, there was no question of it being considered by the Tribunal and, therefore, it cannot be said that it was a question arising out of the order of the Tribunal. Question No. 2, therefore, need not be answered.