COMMISSIONER OF INCOME TAX Vs. YADAV TRANSPORT SERVICE

JUDGEMENT

(1.) THESE three applications arise in similar circumstances and raise common questions as they relate to the assessments of the same assessee, M/s Yadav Transport Service, Nasirabad, and as such they are disposed of by a common order.

(2.) THE assessee, M/s Yadav Transport Service, is a transporter and in the course of assessments of the assessee in respect of the asst. yrs. 1976 -77, 1977 -78 and 1978 -79, the assessee claimed allowance of expenditure incurred on account of entertainment, office and other miscellaneous expenses in the head office and various branches. The ITO disallowed part of the expenditure incurred by the assessee on account of entertainment expenses, office expenses and miscellaneous expenses. On appeal, the CIT (Appeals), Rajasthan, Jaipur, sustained the disallowance of entertainment expenses, office and miscellaneous expenses to a certain extent and reduced the amount disallowed by the ITO. Before the Tribunal, the appeals relating to the aforesaid three assessment years were heard together and the only objection raised on behalf of the Revenue was that entertainment expenses should be wholly disallowed, because of the provisions contained in s. 37(2A) and S. 37(2B) of the INCOME TAX ACT, 1961. The Tribunal did not accept the contention of the Department and held that the expression " entertainment expenditure " should be construed in a liberal manner and as such the claims of the assessee relating to entertainment expenditure allowed by the CIT were upheld by the Tribunal by its order dated May 12, 1981.

(3.) IT may be pointed out that after the Tribunal rejected the application of the Department under s. 256(1) of the Act refusing to make a reference to this Court, the provisions of S. 37 of the Act have been amended by the Finance Act, 1983, with retrospective effect from April 1, 1976. Explanation 2 has been added to sub -s. (2A) of S. 37 and it reads as under :