TMI Blog1982 (12) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ts grip. From 1970 onwards, no expenditure was allowed at all to anybody if it was spent in business entertainment in India. This ban continued right up to 1977. In that year, Parliament went back to square one. How long this is going to last is anybody's guess. All we can say is that Parliament has not been pursuing a clearheaded policy about making this expenditure a non-deductible item. Perhaps we ought not to blame Parliament for being in two minds about how to legislate in this matter. Perhaps, the nature of the expenditure itself accounts for the shifts and changes in legislative policy. For, as in most other things, there is both good and bad in entertainment expenditure. It certainly pays a trader to spend money for making his customers happy. He would do more business that way combining it with pleasure. In this sense, entertainment expenditure is quite a legitimate allowance or charge against profits from the point of view of commercial expediency, if not, from any other view-point, But there is another side to this picture. At current high rates of incometax, which leave pretty little in the hands of upper bracket taxpayers, entertainment expenditure, allowed without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides was to feed us with reported cases of different High Courts including one of our own. But we are inclined to regard them all as so many illustrations of the problem and no more. All of them had, more or less, a common theme to consider. The assessees who figured in the references had provided at their own cost food and drink to their customers and claimed the expenditure as deductible. And the question in each case was whether this was entertainment expenditure or something else. The Allahabad, the Kerala and the Punjab and Haryana High Courts held that it was entertainment expenditure and hence was subject to the statutory ban or restriction. The Gujarat and the Madras High Courts took the opposite view. In one or two reported cases, an attempt was made at understanding what the expression " entertainment expenditure " meant as employed by Parliament in s. 37 of the I.T. Act. They proceeded on the footing that since Parliament had not bothered to define the phrase, it was the religious duty of courts to become animated dictionaries themselves. One or two decisions took the line that Parliament had given an indication that " entertainment expenditure " must be given a fairl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctionaries. If, on the contrary, a special meaning were intended, an indication would or must be there in the statute itself, in which event a reference to the dictionary would be uncalled for. In either case, the dictionary is useless as an aid to the construction of words in common usage. It is often downright hindrance. In Britain, as we said, Parliament expressly enacted that business entertainment included hospitality. Why ? Because in ordinary parlance entertainment does not include hospitality and they in Britain wanted to disallow even hospitality expenditure by including it within the disallowing provision. Our Parliament did not use a similar drafting device. It is, therefore, a just inference that the intention is not to disallow hospitality expenditure. In most of the reported cases the argument advanced was that this or that object of expenditure was not entertainment, but hospitality. In one case which came before this court it was found that soft drinks were served; it was regarded as business hospitality. In another case, an assessee served his customers both soft and hard drinks. The assessing authority drew a line at soft drinks. This court, however, regarded e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g welcome or a pretty girl at the counter as entertainment. We ought not to see things from the point of view of a resistant consumer having a conscientious objection to accept a cup of coffee at the shop from the hands of a shopkeeper because he expects that its cost would go into the price tag. A puritanical or kill-joy approach to this provision must, in our judgment, be ruled out as contrary to the intentions of Parliament. We respectfully agree, therefore, with, the views expressed in some of the judgments that hospitality cannot be confused with entertainment. customer is not entertained, in the real sense of the term, by being offered a cup of coffee in the shop any more than a guest is entertained by a similar offer in the drawing-room of a house. Entertainment is not the word for it. What you extend is only hospitality. But it is altogether different if the trader wishes to provide amusement or entertainment to a customer or to any one with whom he wishes to transact business. Under modern business conditions expenditure of this kind may easily reach a point of no return. It is not easy to get business party sign on the dotted line merely by providing him with entertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly discernible an area of business hospitality which stands clearly outside the concept of business expenditure. It is, therefore, in this context that the statutory provisions disallowing entertainment expenditure, in whole or in part, have to be given effect to. The assessees in the present references are carrying on business of printing and publishing printed material. The question relating to entertainment expenditure cropped up in connection with the assessee's assessments for the years 1972-73 to 1974-75. The provision relating to entertainment expenditure which was in force during the material time was s. 37(2B) as enacted by s. 10 of the Finance Act, 1970, with effect from April 1, 1970. The provision so enacted wholly disallowed any expenditure in the nature of entertainment expenditure incurred within India by any assessee after February 28, 1970. None of the authorities in this case had gone into the nature of the expenditure in question on the lines we have indicated earlier. The assessees claimed certain expenditure as " business promotion expenses ". The ITO disallowed the entire claim under s. 37(2B) without going into the details. The AAC held that the amounts sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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