TMI Blog1981 (3) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the Tribunal was justified, in law, in holding that the amount of Rs. 9,859 was chargeable to tax under sub-section (1) of section 41 of the Income-tax Act for the assessment year 1966-67 ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified, in law, in holding that the amount of Rs. 12,103 was chargeable to tax under sub-section (1) of section 41 of the Income-tax Act for the assessment year 1969-70 ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right, in law, in upholding the deletion of Rs. 29,237 by the Appellate Assistant Commissioner out of the guest house expenses for the assessment year 1969-70 ? " As regards the first two ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouses, that is, the one at S. S. Mills. Out of the break-up of Rs. 34,082 relating to the expenses on the maintenance of the three guest houses, the amount of Rs. 29,237 was allowed by the ITO as permissible under s. 37(3). Thus, out of the total amount of Rs. 90,231 under the abovesaid three heads, the amount of Rs. 60,994 was treated as pertaining to entertainment expenses under s. 37(2A)(i) of the Act by the ITO and he allowed the highest limit of Rs. 5,000 as a deduction. On appeal, the AAC reduced the disallowance from Rs. 55,994 to Rs. 26,757. He supported his action on the two grounds, firstly, that there had been no disallowance in this respect in the past and, secondly, that there was no warrant for the ITO to treat a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the particulars of such amount had to be entered in the prescribed register. From this, it was argued that the food expenses in question were covered by s. 37(3). We do not agree. Firstly, the particulars in the register maintained under r. 6C(3) were not to cover such passengers at the guest house as were not directors or employees of the company. Thus, the question of any payment by the assessee's customers for the facility of lodging or boarding at the guest house is, in our view, irrelevant. Secondly, in any case, rule 6C framed in exercise of the power under section 37(3) could not be pressed into service for interpreting the scope of the expression 'on maintenance of any residential accommodation including any accommodation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority as the rules envisage employees staying in the premises. Accordingly employees cannot be treated as strangers. Hence, unless the guest house is intended for use by a complete stranger, it cannot be called a guest house which falls within the scope of s. 37(3) of the Act. In Karnataka Exports Ltd. v. CIT [1980] 121 ITR 154, the Karnataka High Court has also taken the following view (p. 158): " In our opinion, the use of the words 'any residential accommodation including any accommodation in the nature of a guest house' on the other hand clearly indicates that the allowances permitted under sub-s. (3) of s. 37 of the Act are not only in respect of residential accommodation provided but also any accommodation in the nature of a 'g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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