Income-tax---

----Business expenditure---Disallowance--- Entertainment expenditure-- Expenditure on serving ordinary meals to customers and constituents---Not deductible--- Indian Income Tax Act, 1961, Ss. 37 (2-A) & 37 (2-B).

The provisions of section 37 (2-B) of the Income Tax Act, 1961, are applicable to expenses incurred for serving ordinary meals to an assessee's customers and constituents.

Phool Chand Gajanand v. CIT (1989)177 ITR 265 (All.) fol.

JUDGMENT

At the instance of the assessee, the following question has been referred by the Income-tax Appellate Tribunal under section 256(1) of the Income Tax Act, 1961 for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the provisions of section 37(2-B) were applicable to the expenses incurred for serving ordinary meals to the assessee company's customers and constituents?

In Phool Chand Gajanand v. CIT (1989) 177 ITR 265), a Full Bench of this Court has held that any expenditure incurred by an assessee for the messing of its customers falls within the purview of the words "expenditure in the nature of entertainment expenditure" within the meaning of section 37(2-A) and (2-B) of the Act and the assessee is, therefore, not entitled to claim the same as a deduction.

Following the said authority, we find no infirmity in the order of the Appellate Tribunal which held that the provisions of section 37(2-B) were applicable to the expenses incurred for serving ordinary meals to its customers and constituents by the assessee-company.

The question is, therefore, decided affirmatively, that is, in favour of the Revenue and against the assessee. No order as to costs.

M.BA./2387/T Question answered.