Commission Of Income Tax v. State Bank Of Bikaner

(Commission of Income Tax Vs. State Bank of Bikaner & DATE OF ORDER : Hon'ble Mrs. Gyan Sudha Misra,J.Hon'ble Dr. Vineet Kothari, J. Mrs.Parinitoo Jain, for the assessee-applicant.Mr.PK Kasliwal, for the respondent-revenue. This reference has been made by the Income TaxAppellate Tribunal, Jaipur Bench, Jaipur by order dated29.1.1981 to answer as to whether on the facts and inthe circumstances of the case, the Tribunal wasjustified in holding that expenses of Rs.1,71,791(rupees one lac seventy one thousand seven hundred nintyone only) could be termed as entertainment expenses orcould be treated as business development expenses. The aforesaid question arose as the respondentState Bank of Bikaner & Jaipur (for short as "SBBJ") hadclaimed Rs.1,71,791/- as expenses towards entertainmentas it was claimed as business development expenditurewholly allowable on the premise that Bank had toentertain the customers and other visitors who visitedthe Bank, who had to be entertained and this wasessentially for the development and promotion ofbusiness of the Bank. The Income Tax Appellate Tribunaldecided the question in favour of the respondent-assessee as it was held that although a sum of Rs.1,71,791/- has been claimed as expenditure onentertainment to be treated as business developmentexpenditure, it could not be held to be exorbitant asthis amount had to be distributed towards 400 branchesof SBBJ and if this amount would be bifurcatedbranchwise, then the average monthly expenditure on eachbranch towards entertainment would come to Rs.25/- to30/- only per branch and, therefore, it was held by theTribunal that this amount was reasonable to be claimedtowards entertainment and it had to be treated towardsbusiness development and was held allowable expenditure.The appeal of the assessee was thus allowed. The department of Income Tax under the oldprovisions of Income Tax Act filed an application forreference of the matter before the High Court as noappeal at that point of time in the year 1980 wasprovided under the Act and, therefore, the aforesaidquestion of law was referred to this Court whereinquestion arose as to whether sum of Rs.1,71,791/- couldbe termed as entertainment expenses towards businessdevelopment or it had to be treated as entertainmentexpenditure allowable subject to limits prescribed underthe Act. Having heard learned counsel for the parties and onperusal of the order of the Tribunal, we do not feelthat the Tribunal was justified in even referring thematter at all to this court and it was fit to berejected by the Tribunal itself since the Tribunal seems to have ignored the fact that the Tribunal had given cogent andconvincing reason while allowing the expenses towardsentertainment expenditure as business development expenditureas Rs.1,71,791/- is not an expenditure in just one branch ofSBBJ but it has been spent by 400 branches of the respondent-Bank which has righlty been held to be reasonable and notexorbitant or lavish in any manner. It is no doubt true thatif the expenditure on entertainment by the assessee could betreated as lavish expenditure or flashy in any manner, thesame cannot be treated as expenditure towards businessdevelopment even if that be in the nature of entertainmentbut this question obviously will have to be decided on thefacts of each case and merely because the expenses incurredin this reference by the respondent-assessee isRs.1,71,791/-,the same cannot be treated as precedent forother years as it is Assessing Authority who will have to usehis judicious discretion to decide as to whether amountclaimed towards entertainment and thereby businessdevelopment could be so treated in the instant matter. We are of the view that sum of Rs.1,71,791/- incurred onthe entertainment of customers or other visitors by 400branches cannot be treated lavish in any manner and,therefore, we do not feel that the Tribunal's reference wasjustified. The reference is answered in negative against therevenue and matter thus be treated as disposed of. We are of the view that sum of Rs.1,71,791/- incurred onthe entertainment of customers or other visitors by 400branches cannot be treated lavish in any manner and,therefore, we do not feel that the Tribunal's reference wasjustified. The reference is answered in negative against therevenue and matter thus be treated as disposed of. Accordingly this matter is disposed of. [Dr.Vineet Kothari],J. s.rawat/- [Gyan Sudha Misra],J.