TMI Blog1988 (4) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had also in the course of the business provided tea, coffee etc. and such expenditure amounted to Rs. 13,451. This was also disallowed as entertainment expenditure. Since the above expenditure, although varying in terms very widely have been treated as entertainment expenditure, it would be necessary for us to go into them in details. We will first take up the expenditure incurred in the Celebrations of the 11th year of the Company. The total expenditure incurred was as a follows: Rs. Sargam Orchestra 30,000 Cost of tea etc. at Ravindra Bharati 352 -do- 350 Brooms etc. 27 Badges 210 Photographers 400 Video Film 1,200 Photographers 184 Design Boards 424 Balance amount 145 Sundry expenses 933 Tfd. From sales incentives 1,650 Total 35,843 A musical show was arranged at Ravindrabharati as part of the 11th Anniversary Celebrations. The music performance was given by Sargam Orchestra to whom a total payment of Rs. 30,000 was paid. All other expenses are inciden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cinemas and other places of the public entertainment. Therefore, an entertainment to come within the definition of s. 2(b) and of the provisions of the Act must be some exhibition, performance, amusement, game or sport for the purpose of entertainment, that is, for affording some sort of amuseument and gratification to those who see or hear it." This was also considered by the Andhra Pradesh High Court in the case of Aswathanarayana vs. State of AP, and the following passages are taken from that decision: "The word "entertainment s" occurring in Entry 62 is of wide significance and embraces within its fold cinematograph exhibitions. It includes all varieties of entertainments and there is no warrant for confining it to entertainments or amusements, other than cinemas shows. The specific mention of cinema in Entry 33 does not disclose the intention of the framers of the Constitution to take away cinemas from the ambit of that Entry. Obviously, cinemas had to be separately mentioned because the power to make laws in regard to cinemas given to State legislatures was subject to Item 60 of the Union List which relates to sanctioning of cinematograph films for exhibition. It was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re again, the emphasis is on providing food or drinks. A similar view has been taken by the Allahabad High Court in the case of Brij Raman Das Sons vs. CIT (1976) 104 ITR 541 (All). 7. The CBDT has also confined the expression to provision of food and drinks only. The reference to the lavish expenditure in hotels found in the circulars would show that the Government also had in view the expenditure of providing refreshments only. 8. In view of the above analysis, the expression "entertainment" found in the section has to be confined to provision of refreshment, etc. and should not be extended to include amusements and diversions. There is also internal evidence in the shape of ss. 37(3A), (3B), (3C) and (3D). These sections dealt with the expenses incurred by the assessee during the asst. yrs. 1984-85 to 1986-87 on sales issued explaining these provisions in circular No. 240 dt. 17th May, 1978, the CBDT had stated "as the terms 'publicity' and 'sales promotion' have a wide aptitude, expenditure incurred by tax payers on fashion shows, beauty contests, consumer contests, consumer gift offers and free samples or gifts will fall within the ambit of new sub-s. (3A) of s. 37 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 3,750 each. The Company had informed the members about this scheme by the Circular issued by them on 1st June, 1983. This circular was an offer to those members to bring in 5 or more subscribers. Those who became eligible for it have accepted the offer and had completed the contract. Thus, the payment made by the Company is on the basis of a contract. It is just like commission paid to agents. It is impossible to hold that commission paid to agents would be entertainment expenditure. We may, in this connection, refer to the decision of this Bench in the case of Mopeds India Ltd. vs. IAC (1984) 7 ITD 324 (Hyd). In that case, the assessee had paid certain over-riding amounts to the distributors. These amounts were disallowed by the ITO under s. 37(3A) on the ground that it represented expenditure on advertisement, publicity and sales promotion. The Tribunal observed "the payment is nothing more than an additional compensation of the same nature as selling commission which had been allowed and has not been treated as sales promotion expenses. A selling agent's commission, in our opinion, can never be treated as an outlay on advertisement, publicity or sales promotion. This is part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept that the arrangement of transport to Katmandu and back is a matter of hospitality. Therefore, even under Expln.-2 this type of expenditure cannot be included as 'entertainment expenditure'. This addition also stands deleted. 16. We next consider an addition of Rs. 13,451. The correct nature of this expenditure is not very clear. The ITO has dealt with this point in para 4 of the assessment order. According to him, this represented payments made to various clubs. In the grounds of appeal, the assessee had stated that the sum was spent by way of courtesy to its customers. The Commissioner(A) has dealt with this point in para-6 of her order and she gave a finding that the expenditure represents tea and coffee expenditure. Before us, no clarification was made. We have therefore to uphold the findings of the Commissioner(A) and that finding should lead to the conclusion that the expenditure is in the nature of 'entertainment expenditure'. We, therefore, uphold the disallowance made by the Commissioner(A). 17. In ground No.7, the question is whether certain payments made would constitute business expenditure. The assessee had advanced an amount of Rs. 5,000 to the Nizam Club to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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