COMMISSIONER OF INCOME TAX Vs. CARBORANDUM UNIVERSAL LIMITED

JUDGEMENT

(1.) AT the instance of the Revenue, the Tribunal has stated a case and referred the following questions of law for the asst. yr. 1975-76 under s. 256(1) of the IT Act, 1961 (hereinafter referred to as 'the Act').

(2.) THE answer to the second question need not detain us as the Tribunal has followed its earlier order for the asst. yr. 1973-74 in the assessee's own case and by our judgment in Tax Case Nos. 220 and 221 of 1981 [reported as Carborandum Universal Ltd. vs. CIT of even date we have upheld the order of the Tribunal for the asst. yr. 1973-74. Following the judgment in Tax Case Nos. 220 and 221 of 1981 of even date, we answer the second question of law referred to us in the affirmative and against the Revenue.

(3.) WE have carefully considered the submissions of the learned counsel for the Revenue as well as the learned counsel for the assessee. It is no doubt true that the decision of the Bombay High Court in Ocean Carriers Pvt. Ltd. case, cited supra, makes it clear that any accommodation maintained by the assessee to provide lodging or boarding to any person including an employee or a director of a company or any holder of any office of the company would be in the nature of the guest house and the amendment made by the Finance Act, 1985 to s. 37(5) of the Act is only clarificatory in nature and would apply for the asst. yr. 1977-78 as well. But, the decision of the Bombay High Court, has to be read in the light of the decision of this Court in the case of CIT vs. Aruna Sugars Ltd. . This Court considered the expression, 'guest house' occurred in s. 37(3) of the Act and after considering the dictionary meaning and the relevant rules, came to the conclusion that where a guest house is maintained, either in the principal place of business or in a place where the factory is located for the directors and other employees of the company who have to visit it for the purpose of the company's business, then, any expenditure incurred for the maintenance of such accommodation cannot be brought within the scope of s. 37(3) of the Act. This Court also held that the expression, 'guest' did not comprehend the employees and the employees could not be regarded as strangers so as to be regarded as guests. Finally, this Court held that unless a guest house is intended for the use by a complete stranger, it cannot be called a guest house which falls within the scope of s. 37(3) of the Act.