Associated Stone Industries (Kotah) Ltd. vs Commissioner of Income Tax

On an application filed u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as ''the Act''), the Tribunal has referred the following questions for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the expenditure incurred by the assessee on the preparation of the Income Tax returns is an expenditure laid out wholly and exclusively for the purpose of the business of the assessee and so is allowable u/s 37(1) of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the messing expenses and/or the expenses on tea and coffee, etc., incurred by the assessee in the accounting period relevant to the assessment year 1978-79 in respect of its customers are/is an expenditure in the nature of entertainment expenditure within the meaning of section 37(2A) of the Income Tax Act, 1961 ?"

The assessment year involved is 1978-79 for which the previous year ended on 30-9-1977. In the year under consideration, the assessee has claimed Rs. 9,092 as deduction out of which Rs. 6,000 was against fees paid to the Chartered Accountant for filing the return. The assessee has also claimed expenses incurred on customers and claimed deduction u/s 37(2A) of the Act. The expenditure which was paid to the Chartered Accountant for filing the return was disallowed by the Tribunal, against that the assessee preferred the reference application and the amount incurred on the customers has been allowed by the Tribunal, against that the reference application has been preferred by the department.

Heard the learned counsels for the parties. Considering the submissions, the fees paid to the Chartered Accountant for preparing and filing the return, in our view, is in no way wholly and exclusively for the purpose of business or earning income, therefore, there is nothing wrong in the view taken by the Tribunal.

The question referred at the instance of the revenue is as to whether the expenditure incurred on the customers can be allowed undertion 37(2A) or (2B). In this context, Mr. Mehta brought to our notice the decision of this court in the case of Commissioner of Income Tax Vs. Associated Stone Industries (Kotah) Ltd., wherein the question has been answered in favour of the assessee.

Considering these facts and submissions, in the result, we answer question No. 1 in the negative, i.e., in favour of the revenue and against the assessee. The question at the instance of the revenue was answered in the affirmative, i.e., in favour of the assessee and against the revenue.

Reference so made stands disposed of accordingly.