COMMISSIONER OF INCOME TAX Vs. CHEMPLAST SANMAR LTD

JUDGEMENT

(1.) 414/Mad/2001 in respect of the asst. yr. 1997 -98.

(2.) THE facts of this case are as follows : The assessee -company is engaged in the manufacture of PVC resins, caustic soda, chloremethenes, etc. For the asst. yr. 1997 -98, the assessee claimed a sum of Rs. 3,43,116 as expenditure incurred towards rent/insurance/repairs in respect of guest/ transit house. The AO disallowed the same on the ground that the provisions of s. 37(2A) is very specific which disallow any expenditure incurred on the maintenance of a residential accommodation in the nature of the guest house and brought the same to tax. The CIT(A) allowed the appeal relying on the decision of the Tribunal wherein it has been held that the guest house expenses with observation that embargo imposed by s. 37(3) applies to the items mentioned in sub -s. (1) thereof and not to the expenses claimed under ss. 30 and 36. Aggrieved by that order, the Revenue and the assessee filed appeals before the Tribunal and the Tribunal held that the expenditure on guest house is an allowable expenditure following the decision of this Court in CIT vs. South India Vicose Ltd. (2003) 259 ITR 107 (Mad). The correctness of the same is now canvassed before us by formulating the following question of law :

(3.) THOUGH the counsel for the Revenue started arguing the case on the merits, the learned counsel for the assessee submits that the dispute in respect of the disallowance is only a sum of Rs. 3,43,116. Hence, the tax effect is much the impugned order need not be elaborately discussed and decision rendered and can be disposed of based on the circular issued despite the fact that CIT vs. South India Viscose Ltd. (supra) has been disapproved by the subsequent Supreme Court judgment.