TMI Blog2005 (7) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... -7-2005 - Judge(s) : V. C. DAGA., A. S. AGUIAR. JUDGMENT The judgment of the court was delivered by A.S. Aguiar J.- The following question of law, at the instance of the assessee, viz., M/s. Greaves Cotton and Co. Ltd., is referred for the opinion of this court under section 256(1) of the Income-tax Act, 1961 arising out of the order of the Tribunal in I.T.A. No. 3611/Bom of 1983 for the assessment year 1986-87. "Whether, on the facts and in the circumstances of the case, the expenditure incurred on maintenance of the transit quarter at Car-michael Road, Bombay, for accommodating its employees visiting Bombay from outstations for the purposes of business could be disallowed under section 37(4) of the Income-tax Act, 1961, treatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 197 wherein the High Court held that under section 37(4), the expenditure on guest house had to be disallowed unless it could be shown that it was used exclusively as a holiday home by the employees of the assessee. In view of the said judgment, the Tribunal disallowed the claim of the assessee under section 37(4). Before this court, the learned advocate for the Department has relied upon the judgment of this court in the case of Raja Bahadur Motilal Poona Mills Ltd. v. CIT [1995] 212 ITR 175, holding that under section 37(4)(i) of the Income-tax Act, no allowance shall be made in respect of any expenditure incurred by an assessee on maintenance of any residential accommodation in the nature of a guest house after February 28, 1970, and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness consideration but obviously no part of obligatory expenditure to be incurred by the employer. An accommodation maintained for use of employees while on leave and occupation is not for business undoubtedly falls in category of a guest-house. To keep it out of rigours of sub-section (4) specific provision was needed. The very facts that expenses incurred for maintenance of such holiday home are kept outside the purview of sub-section (4) indicates that expenses incurred to maintain an accommodation exclusively to be used by the employees while they are on duty and not otherwise was not intended to be brought within the purview of sub-section (4) of section 37. In the aforesaid circumstances, on the premises that the accommodation was av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide Bombay while visiting Bombay from outstation. Before this court, the learned advocate for the assessee, has contended that the employees were visiting Bombay for the business of the company and, therefore, the question referred to this court for opinion by the Tribunal has been redrafted to clarify that the transit quarters were meant for accommodating outstation employees visiting "for the purpose of business". It is contended that the expenditure is allowable as it was for the purpose of business or profession under section 37(1) and not under section 37(4). Section 37(1) reads as follows: "Any expenditure (not being expenditure of the nature described in sections 30 to 36 and section 80W and not being in the nature of capital e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4). No doubt before the Income-tax Officer the assessee had not claimed that the employees were visiting Bombay for business purposes and sought deduction under section 37(4). But from the question of law now referred to by the Tribunal for opinion of the court, it is clear that the assessee-company is seeking the deduction under section 37(1) as the employees were coming to Bombay on business of the company. It is not disputed that the employees of the assessee posted at its branches outside Bombay were visiting Bombay on business of the company and were themselves accommodated in the said quarters which were in the nature of transit quarters. In this view of the matter, the claim for allowance of expenditure under section 37(1) is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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