Delhi High Court
Commissioner Of Income-Tax vs Expo Machinery Ltd. on 15 April, 1991
Equivalent citations: [1991]190ITR576(DELHI)
Bench: B.N. Kirpal, D.K. Jain
JUDGMENT
1. The petitioner seeks reference of the following question :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in holding that 35% of the expenditure of Rs. 1,55,003 out of entertainment, seminar and conference expenses was not hit by the provisions of section 37(2A) of the Income-tax Act by relying upon the decision of the Income-tax Appellate Tribunal in the case of Messrs. Usha International Ltd., which has not been accepted bu the Department ?"
2. Apart from the fact that, in respect of Usha International Ltd., the petition under section 256(2) of the Income-tax Act was dismissed by this court, we may note that the essential question is whether the expenditure of 35% of Rs. 1,55,003 was hit by the provisions of section 37(2A) of the Income-tax Act. The Commissioner of Income-tax has found as a fact that, along with the customers, the employees of the company had also taken food. He, however, decided did not allow any expenditure because he was of the opinion that the expenditure on food and beverages was not incurred in the factory premises but was incurred in the hotels. The Tribunal has also found as a fact that the employees of the company had taken eatables along with the guests and customers of the company and the expenditure which is incurred on food, etc., of the employees is expressly excluded by virtue of the provisions of section 37(2A), Explanation 2. It is a finding of fact as to whether any part of the expense of Rs. 1,55,003 was incurred on the food, etc., of the exployees. This finding of facts has been answered in favor of the assessed. It is necessary in such a case that certain amount of estimate has to be resorted to. The Tribunal has estimated such expense as 35% which cannot be said to be unreasonable and, in any case, this estimate is also a question of fact. The expense on the eatables of the employees which is excluded from the purview of section 37(2A), includes expense which is incurred, inter al ia, at the place of work of the employees. When the employees are having their food along with the company's customers in a hotel, in discharge of their official dutoes, the employees are taking food while at work because it is their work and duty to entertain the customers of the company. Therefore, wherever any expenditure is incurred on the food and beverages of the employees at the time when they are working, would obviously be excluded from the purview of section 37(2A).
3. The answer to the question proposed, in one sense, is a question of fact and, in another sense, is self-evident.
4. Dismissed.