COMMISSIONER OF INCOME TAX Vs. ANDHRA SUGARS LIMITED

JUDGEMENT

(1.) This is a reference under section 256(2) of the Income-tax Act, 1961 (for short "the Act"), at the instance of the Revenue. The following question was referred to this court for opinion : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in upholding the deduction allowed in respect of entertainment expenditure to the extent of Rs. 29,040 ?"

(2.) After hearing the arguments of both sides, we are of the view, the question needs to be recast and we reframe the same as under :

(3.) It may be necessary to note the facts giving rise to this question. The respondent-assessee is a public limited company registered under the Companies Act. In the assessment year 1976-77, it incurred an expenditure of Rs. 30,040 for providing tea, coffee, etc., to the customers, staff and technicians and claimed the same as permissible deduction. The Income-tax Officer, being of the view that it falls under "entertainment expenditure", disallowed the same. But, on appeal, the Commissioner of Income-tax (Appeals) held that it cannot be treated as "entertainment expenditure"; however, he reduced the expenditure to Rs. 29,040 as allowable deduction. On appeal by the Revenue, the Income-tax Appellate Tribunal, referring to its earlier order in respect of the same assessee for the earlier assessment year, dismissed the appeal on 6/03/1981. It is from that order of the Tribunal that the above said question arises.