Commissioner of Income Tax vs Madho Lal Sua Lal

B.P. Jeevan Reddy, C.J.—The question referred u/s 256(1) of the Income Tax Act, 1961, by the Tribunal reads thus :

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the expenditure incurred in providing food to the assessee''s customers could not be disallowed as entertainment expenditure u/s 37(2B) of the Income Tax Act, 1961 ?"

It may be noticed that the question is confined to the expenditure incurred in providing food to the assessee''s customers. The question does not pertain to the expenditure incurred in providing food or other items to the staff of the assessee. The question as referred is concluded against the assessee by a decision of this court in Phool Chand Gajanand Vs. The Commissioner of Income Tax, . Following the said decision, the question referred is answered in the negative, i.e., in favour of the Revenue and against the assessee.

It is, however, made clear that if any amount is spent on providing food or other items to the members of the staff, that would be an admissible expenditure u/s 37 of the Act. If there is any such expenditure incurred on staff, the Tribunal may look into the matter and pass appropriate orders while passing final orders u/s 260 of the Act.