TMI Blog1982 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... n to customers who visited the assessee's place of business. The ITO disallowed the entire expenditure under s. 37(2B) of the Act. On appeal, the Tribunal went into the nature of the expenditure and found that it represented the cost of supply of coffee, tea and other refreshments to the assessee's customers. According to the Tribunal, these expenses were petty in nature and could hardly be regarded as entertainment expenditure, because there was nothing lavish or entertaining about it. On this ground, the Tribunal set aside this part of the assessment order of the ITO and allowed the entire expenditure of Rs. 3,622 to be allowed as an admissible deduction. One other point which was the subject of controversy between the Department and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as accepted in appeal by the AAC. According to that appellate authority, the firm and the partner must be regarded as being placed in a single jural relationship. The point decided was that although there were two accounts of the partner, Natarajan, the capital account and the drawings account, the two cannot be regarded as different or independent accounts, so far as the accounting with the firm was concerned. According to the AAC, therefore, what has to be disallowed under the Act as payment to the partner call only be the net interest paid by the firm to the partner. Against this understanding of s. 40(b) of the Act by the AAC, the Department went in appeal to the Tribunal. The Tribunal, however, agreed with the view expressed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being merely the manifestation of elementary courtesy which the assessee while carrying on the business extended, or was expected to extend, to their constituents, vide CIT v. Karuppuswamy Nadar and Sons [1979] 120 ITR 140 (Mad). We answer the first question in favour of the assessee and against the Department, following that decision. The second question as to the non-disallowance of the interest payment made by the firm to the partner, Natarajan, in the computation of the firm's total income has to be considered in the language of s. 40(b) of the Act. This provision is a replica of s. 10(4)(b) of the Indian I.T. Act, 1922. These provisions relate to the computation of the total income of an assessee who is a partnership firm. Section 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner. There cannot be any net salary or net bonus or net remuneration as matters of disallowance. They can only be salary, as such, or bonus, as such, or commission, as such, or remuneration as such which are the subject of disallowance. In like manner, when the section speaks of payment of interest by the firm to a partner as the subject of disallowance, it can only be payment of 'gross' interest in the particular account in which interest is payable. Salary, bonus, commission or remuneration do not have what may be characterised as a two-way traffic. Salary is payable only by the firm to the partner. Bonus, commission or remuneration are similarly payable by the firm to the partner and this is the reason why they are all disallowed. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant statutory provision. Learned counsel pressed on us the departmental circular which was relied on by the Tribunal. When a matter comes before this court for an advisory opinion on the state of the law or of a fiscal principle, or on the construction of any provision in the taxing enactment, the last place where we should look for aid or guidance would be a circular from the CBDT on the subject. We are not bound by the Board circulars. Besides, these circulars have the knack of being inconsistent. For, they are, for the most part, circulars for the occasion. We are not, therefore, inclined even to take a look into the circular referred to us. If the circular has expressed a view which the Department has not followed in this case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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