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TMI Blog2007 (9) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... o cancel the order under section 263 dated March 17, 1989 ? (ii) Whether, on the basis of available materials on records, it was legally possible for the Tribunal to conclude that the expenditure to the extent of Rs. 1,45,239 out of the total expenditure of Rs.1,60,239 claimed as deduction towards messing was incurred by the assessee exclusively for providing food and beverages to its employees ? (iii) Whether the Tribunal was justified in law to hold that in the facts and circumstances of the case, the Commissioner ignored the provisions of Explanation 2 to section 37(2A) of the Income-tax Act ?" 2. The facts which are essential to be stated are that the assessee is a partnership firm and derived income from manufacture and sale of bidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for. 6. We have heard Mr. Rohit Arya, learned senior counsel along with Mr. Sanjay Lal for the Revenue and Mr. A. K. Shrivastava, learned counsel for the assessee-respondent. 7. It is submitted by Mr. Arya, learned senior counsel appearing for the Revenue that the order of the Commissioner in exercise of jurisdiction under section 263 of the Act cannot be found fault with inasmuch as the order of the Assessing Officer was illegal and prejudicial to the interest of the Revenue. 8. Mr. Shrivastava, learned counsel for the assessee, submitted that if the language of section 37(2A) is read in a proper perspective it is absolutely vivid that the facilities to the workers in the manner it has been provided would never come under the concept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expires after the 30th day of September, 1967, as is in excess of the aggregate amount computed as hereunder:- Explanation 2.- For the removal of doubts, it is hereby declared that for the purposes of this sub-section and sub-section (2B), as it stood before the 1st day of April, 1977, 'entertainment expenditure' includes expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in the office, factory or other place of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (2A) of section 37. The finding of fact in all cases, therefore, satisfies this test to allow deduction of the expenditure incurred by each assessee and claimed under this head for the period prior to April 1, 1976. Sub-section (2A) was inserted with effect from October 1, 1967, by the Taxation Laws (Amendment) Act, 1967, and Explanation 2 inserted therein by the Finance Act, 1983, retrospectively, with effect from April 1, 1976, while sub-section (2B) was inserted with effect from April 1,1970, by the Finance Act, 1970. As earlier stated, these cases relate to the period prior to April 1, 1976, from which date Explanation 2 to sub-section (2A) was inserted retrospectively. We have, therefore, to construe sub-section (2A) as it exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of payment of tax under the Income-tax Act, 1961, during the relevant period prior to April 1, 1976." 12. That apart, at this juncture, we may hasten to add the Explanation also clearly postulates that benefits given to the workmen would not be included as entertainment expenditure. 13. Quite apart from the above, we may also note that this court in the case of CWT v. Dr. Ajad Kutnar Jain (HUF), Sagar (W. P. No.162/98), while taking note of the tax impact and placing reliance on the decision rendered in CIT v. Pithwa Engineering Works [2005] 276 ITR 519 (Bom), has opined thus: "11. The factual scenario can be perceived from another aspect. Submission of Mr. A. K. Shrivastava, learned counsel for the respondent is that the tax impact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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