TMI Blog2002 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... he Calcutta High Court given in the cases of CIT v. Upper Ganges Sugar Mills Ltd. [1994] 206 ITR 215 and Kesoram Industries and Cotton Mills Ltd. v. CIT [1991] 191 ITR 518 squarely cover the issue; and (ii) The wording of section 37(4), as operative at the material time is too clear to permit any doubts being had as regards the disallowance of the guest-house expenditure items. Faced with the stiff opposition of the Revenue, Dr. Pal appearing for the assessee, had to place before us numerous authorities to support his case for admission of the appeal. Before we go on to the authorities, let us discuss the basic point on the wording of the section itself, so that the legal issue, simple and ordinary as it is, is clearly seen from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section, be reduced by the amount, if any, received from persons using the guest-house: Provided further that nothing in this sub-section shall apply in relation to any guest-house maintained as a holiday home if such guest-house. (a) is maintained by an assessee who has throughout the previous year employed not less than one hundred whole-time employees in a business or profession carried on by him; and (b) is intended for the exclusive use of such employees while on leave. Explanation.--For the purposes of this sub-section,-- (i) residential accommodation in the nature of a guest-house shall include accommodation hired or reserved by the assessee in a hotel for a period exceeding one hundred and eighty-two days during the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any manner at all. Section 37(1) is quoted below: "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'. Explanation.--For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose of CIT v. Tungabhadra Industries Ltd. [1994] 207 ITR 553; CIT v. Orient Paper and Industries Ltd. [1995] 214 ITR 473; National Engineering Industries Ltd. v. CIT [1999] 236 ITR 577 and CIT v. Coates of India Limited [2002] 254 ITR 232. He said that a similar line of reasoning has been adopted in several cases in several of the other High Courts and he mentioned the Bombay decision in CIT v. Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 and the Kerala Full Bench decision, reported at CIT v. Travancore Cements Ltd. [1999] 240 ITR 816. As against these authorities, Mr. Mullick submitted that the two cases mentioned above, viz., Upper Ganges and Kesoram Industries (to repeat, reported respectively at [1994] 206 ITR 215 (Cal) and [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twithstanding anything contained in section 37(1)" cannot detract from the power, extent and validity of section 37(4). These non obstante clauses are added to increase the effectiveness of the section, or sub-section, and not for the reverse purpose. Thus, the court has to read section 30 along with section 37(4). Section 30 is the general section for all buildings. Section 37(4) is the special section for buildings which are guest-houses. The disallowance as per the special section is specially enacted and it prevails. This is the view in Kesoram Industries' case [1991] 191 ITR 518 (Cal) and, in our opinion, no two views are possible. Maintenance: This is not specially mentioned in any of the sections 30 to 36. Thus maintenance is appr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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