The Commissioner Of Income-Tax, Patiala v. M/S Punjab Tractors Limited, Mohali

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 3 of 2002 Date of Decision: April 26, 2010 The Commissioner of Income-tax, Patiala ..Appellant Versus M/s Punjab Tractors Limited, Mohali ...Respondent CORAM:HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JITENDRA CHAUHAN Present:Ms. Urvashi Dhugga, Advocate,for the appellant-revenue.for the appellant-revenue. Mr. Pankaj Jain, Advocate, for the respondent-assessee. 1.To be referred to the Reporters or not?2.Whether the judgment should be reported inthe Digest?2.Whether the judgment should be reported inthe Digest? M.M. KUMAR, J. This appeal filed under Section 260-A of the Income-tax Act, 1961(for brevity, ‘the Act’), challenges order dated 19.4.2001, passed by the IncomeTax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh, in I.T.A. No.97/Chandi/95, in respect of the Assessment Year 1990-91. The appellant-revenue has sought to raise the following substantial questions of law:- “1.Whether on the facts and circumstances of the case, the ITATwas right in law in holding that the expenditure incurred onpresentation of articles did not contain logo of the assesseeand was not meant for advertisement but for the businesspromotion in general and hence not disallowable under Rule6B?was right in law in holding that the expenditure incurred onpresentation of articles did not contain logo of the assesseeand was not meant for advertisement but for the businesspromotion in general and hence not disallowable under Rule6B? 2.Whether on the facts and circumstances of the case, the ITATwas right in holding that the amount on account of rent paidto PSICC was allowable under Section 30 of the Income TaxAct, 1961 and provisions of Section 37(1) and 37(4) werenot attracted in this case? 3.Whether on the facts and circumstances of the case, the ITATwas right in allowing 50% as entertainment expensesdisallowed under Section 37(2)(A)?” 2.We have heard learned counsel for the parties and perused thepaper book with their able assistance. Re: Question No. 1 3.Mr. Pankaj Jain, learned counsel for the respondent-assessee at theoutset has apprised the Court that this appeal pertains to the assessment year1990-91 and the tax effect involved is only about Rs. 6,000/-, which inmonetary terms is diminutive. Therefore, he does not press for decision onquestion No. 1 on merit. In that regard we follow the view taken by the FullBench of this Court in the case of Commissioner of Income Taxv. Smt.Aruna Luthra, (2001) 252 ITR 76. Accordingly, we prefer to refrain frominterfering in the order passed by the Tribunal qua question No. 1.Re: Question No. 2 4.Mr. Pankaj Jain, learned counsel for the assessee-appellant at theoutset has very fairly conceded that question No. 2 is no longer res integra andthe same has been answered against the respondent-assessee by Hon’ble theSupreme Court in the case ofBritannia Industries Ltd.v. Commissioner ofIncome-tax, [2005] 278 ITR 546 (SC). We find that a similar question cameup for our consideration in ITA Nos. 60 of 2001 and 23 of 2002 between the same parties. While following the judgment of Hon’ble the Supreme Court inBritannia Industries Ltd. (supra) we have answered the question against therespondent-assessee and in favour of the revenue, vide our order of even datepassed in ITA No. 60 of 2001. Accordingly, while following the samereasoning and keeping in view the consistency, we answer question No. 2 infavour of the appellant-revenue and against the respondent-assessee in thisappeal as well. Re: Question No. 3 same parties. While following the judgment of Hon’ble the Supreme Court inBritannia Industries Ltd. (supra) we have answered the question against therespondent-assessee and in favour of the revenue, vide our order of even datepassed in ITA No. 60 of 2001. Accordingly, while following the samereasoning and keeping in view the consistency, we answer question No. 2 infavour of the appellant-revenue and against the respondent-assessee in thisappeal as well. Re: Question No. 3 5.The last question for adjudication is whether 50% of expensesunder the head ‘entertainment expenses’ has been rightly allowed by theTribunal. A perusal of the order passed by the Tribunal shows that it has upheldthe order dated 15.11.1994, passed by the CIT(A) by adding that the expenseswere allowable as deduction in terms of the explanation to Section 37(2A). Itwould be appropriate to examine the explanation enumerating the expression‘entertainment expenditure’, which reads as under:- “Explanation. – For the purposes of this sub-section,“entertainment expenditure” includes-“entertainment expenditure” includes- (i)the amount of any allowance in the nature of entertainmentallowance paid by the assessee to any employee or otherperson;allowance paid by the assessee to any employee or otherperson; (ii)the amount of any expenditure in the nature of entertainmentexpenditure not being expenditure incurred out of anallowance of the nature referred to in clause (i) incurred forthe purposes of the business or profession of the assessee byany employee or other person;expenditure not being expenditure incurred out of anallowance of the nature referred to in clause (i) incurred forthe purposes of the business or profession of the assessee byany employee or other person; (iii)expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of foodor beverages or in any other manner whatsoever and whetheror not such provision is made by reason of any express orimplied contract or custom or usage of trade, but does notinclude expenditure on food or beverages provided by theassessee to his employees in office, factory or other place oftheir work.” 6.A perusal of the aforesaid provision shows that the amount of anyallowance in the nature of entertainment allowance if paid by the assessee toany of its employee or other person would qualify for deduction. Likewise, anyamount of expenditure in the nature of entertainment incurred for the purposesof business or profession of the assessee by any employee or other person, hasalso been included in the list of deductions. The CIT(A) had taken the view thatthe Assessing Officer was wrong in making addition of Rs. 1,97,177/- bytreating the same to be entertainment expenses because in the earlier years inthe case of the assessee-respondent, 50% of expenses were allowed underSection 37(2A) by the Tribunal in I.T.A. No. 1304/Chandi/1988, decided on15.3.1994, in respect of assessment year 1981-82. Accordingly, the AssessingOfficer was directed to allow 50% of the amount of Rs. 1,97,177/- asentertainment expenses. On further appeal of the revenue, the Tribunal hasaffirmed the order passed by the CIT(A). 7.Having heard learned counsel for the parties we are of theconsidered view that the matter is no longer res integra and has been answeredby Hon’ble the Supreme Court in the case ofPrakash Cotton Mills Pvt. Ltd.v. Commissioner of Income Tax (Central) Bombay, (1993) 3 SCC 452. Ithas been held that which portion of the miscellaneous expenses claimed by an 7.Having heard learned counsel for the parties we are of theconsidered view that the matter is no longer res integra and has been answeredby Hon’ble the Supreme Court in the case ofPrakash Cotton Mills Pvt. Ltd.v. Commissioner of Income Tax (Central) Bombay, (1993) 3 SCC 452. Ithas been held that which portion of the miscellaneous expenses claimed by an assessee is deductible as entertainment expenses of the assessee is a matter to bedecided by the fact finding authority on the basis of material placed beforethem. It has further been held that when the fact finding authorities recordedtheir concurrent findings then no intervention by the High Court would bewarranted. Therefore, the determination of 50% of the expenses for allowingthe same to be deductible by the CIT(A) followed by affirmation by theTribunal, would not call for any interference. Accordingly, the question isanswered in favour of the respondent-assessee and against the appellant-revenue. Accordingly, the view taken by the Tribunal affirming the view ofCIT(A) is upheld. 8.The appeal stands disposed of in the above terms. (M.M. KUMAR)JUDGE April 26, 2010 (JITENDRA CHAUHAN) JUDGE Pkapoor