Law:

Section:

Section 37(2B) of the income-tax act, 1961-Entertainment expenditure-Whether expenditure incurred by assesses for providing meals and light refreshments to its trade customers in normal course of business amounts to expenditure in nature of entertainment expenditure as contemplated in section 37(2B)-Held, on facts, no Facts The assessee-firm incurred expenditure for providing meals and light refreshments to its trade customers in the normal course of business. The assessee's claim for deduction of the said expenditure was disallowed by the ITO on the ground that the expenditure incurred was in the nature of entertainment expenditure as contemplated under section 37(2B). On appeal, the Commissioner (Appeals) deleted the disallowance made by the ITO and, on further appeal, the Tribunal confirmed the order of the Commissioner (Appeals). On reference : Held The term 'entertainment', in the context of section 37(2B ), on its true construction and meaning, would include the acts and practice of receiving and entertaining strangers and friends; but if the acts or practice of being hospitable, in the sense of providing meals, drinks or other wants of guests, are a part and parcel of the express or implied terms and conditions of the business, trade or profession and are on account of long standing custom in such trade, business or profession, they would not amount to acts of entertainment. Hospitability shown on account of obligation of business arising as a result of an express or implied contract or arising out of a long standing custom of a trade cannot amount to entertainment. Accordingly, the impugned expenditure incurred by the assessee did not amount to expenditure in the nature of entertainment as contemplated by section 37(2B ). Case review CIT v. Lakhmichand Muchhal [1982] 134 ITR 234 (MP) and CIT v. Patel Brothers & Co. Ltd. [1977] 106 ITR 424 (Guj.) followed . Cases referred to CIT v. Lakshmichand Huchhal [1982] 134 ITR 234 ( ), CIT v. Patel Brothers & Co. Ltd. [1977] 106 ITR 424 (Guj.). Judgment Sohani J.-By this reference under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal,…

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