THE COMMISSIONER OF INCOME TAX V. M/S PB TRACTOR LTD

ITA/3/2002

AI Insights

The case involves an appeal by the Commissioner of Income-tax, Patiala against M/s Punjab Tractors Limited, Mohali, concerning three substantial questions of law related to the Income Tax Act, 1961, for the Assessment Year 1990-91. The questions pertained to the deductibility of certain business expenses under the Act. The Tribunal had previously ruled on these issues, which were contested by the appellant in the High Court. The court's decision addressed the legal interpretations and applications of specific sections of the Income Tax Act concerning business promotion expenses, rent deductions, and entertainment expenses.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 719633 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 26-04-2010
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Smt. Aruna Luthra, Britannia Industries Ltd. v. Commissioner of Income-tax, Prakash Cotton Mills Pvt. Ltd. v. Commissioner of Income Tax (Central) Bombay
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: PANKAJ JAIN
• Assessee Lawyers: URVASHI DHUGGA
• Keywords: Advertisement; Assessment Year 1990-91; Business Promotion; Entertainment Expenses; Income Tax; Rent Allowance
• Section: 37(1); 30; 260-A; 37(2)(a); 37(4)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 3 of 2002 Date of Decision: April 26, 2010 The Commissioner of Income-tax, Patiala ..Appellant Versus M/s Punjab Tractors Limited, Mohali ...Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JITENDRA CHAUHAN Present: Ms. Urvashi Dhugga, Advocate, for the appellant-revenue. Mr. Pankaj Jain, Advocate, for the respondent-assessee. 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This appeal filed under Section 260-A of the Income-tax Act, 1961 (for brevity, ‘the Act’), challenges order dated 19.4.2001, passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh, in I.T.A. No. 97/Chandi/95, in respect of the Assessment Year 1990-91. The appellant- revenue has sought to raise the following substantial questions of law:- “1. Whether on the facts and circumstances of the case, the ITAT was right in law in holding that the expenditure incurred on presentation of articles did not contain logo of the assessee and was not meant for advertisement but for the business promotion in general and hence not disallowable under Rule 6B? I.T.A. No. 3 of 2002 2. Whether on the facts and circumstances of the case, the ITAT was right in holding that the amount on account of rent paid to PSICC was allowable under Section 30 of the Income Tax Act, 1961 and provisions of Section 37(1) and 37(4) were not attracted in this case? 3. Whether on the facts and circumstances of the case, the ITAT was right in allowing 50% as entertainment expenses disallowed under Section 37(2)(A)?” 2. We have heard learned counsel for the parties and perused the paper book with their able assistance. Re: Question No. 1 3. Mr. Pankaj Jain, learned counsel for the respondent-assessee at the outset has apprised the Court that this appeal pertains to the assessment year 1990-91 and the tax effect involved is only about Rs. 6,000/-, which in monetary terms is diminutive. Therefore, he does not press for decision on question No. 1 on merit. In that regard we follow the view taken by the Full Bench of this Court in the case of Commissioner of Income Tax v. Smt. Aruna Luthra, (2001) 252 ITR 76. Accordingly, we prefer to refrain from interfering in the order passed by the Tribunal qua question No. 1. Re: Question No. 2 4. Mr. Pankaj Jain, learned counsel for the assessee-appellant at the outset has very fairly conceded that question No. 2 is no longer res integra and the same has been answered against the respondent-assessee by Hon’ble the Supreme Court in the case of Britannia Industries Ltd. v. Commissioner of Income-tax, [2005] 278 ITR 546 (SC). We find that a similar question came up for our consideration in ITA Nos. 60 of 2001 and 23 of 2002 between the 2 I.T.A. No. 3 of 2002 same parties. While following the judgment of Hon’ble the Supreme Court in Britannia Industries Ltd. (supra) we have answered the question against the respondent-assessee and in favour of the revenue, vide our order of even date passed in ITA No. 60 of 2001. Accordingly, while following the same reasoning and keeping in view the consistency, we answer question No. 2 in favour of the appellant-revenue and against the respondent-assessee in this appeal as well. Re: Question No. 3 5. The last question for adjudication is whether 50% of expenses under the head ‘entertainment expenses’ has been rightly allowed by the Tribunal. A perusal of the order passed by the Tribunal shows that it has upheld the order dated 15.11.1994, passed by the CIT(A) by adding that the expenses were allowable as deduction in terms of the explanation to Section 37(2A). It would be appropriate to examine the explanation enumerating the expression ‘entertainment expenditure’, which reads as under:- “Explanation. – For the purposes of this sub-section, “entertainment expenditure” includes- (i) the amount of any allowance in the nature of entertainment allowance paid by the assessee to any employee or other person; (ii) the amount of any expenditure in the nature of entertainment expenditure not being expenditure incurred out of an allowance of the nature referred to in clause (i) incurred for the purposes of the business or profession of the assessee by any employee or other person; (iii) expenditure on provision of hospitality of every kind by the 3 I.T.A. No. 3 of 2002 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 office, factory or other place of their work.” 6. A perusal of the aforesaid provision shows that the amount of any allowance in the nature of entertainment allowance if paid by the assessee to any of its employee or other person would qualify for deduction. Likewise, any amount of expenditure in the nature of entertainment incurred for the purposes of business or profession of the assessee by any employee or other person, has also been included in the list of deductions. The CIT(A) had taken the view that the Assessing Officer was wrong in making addition of Rs. 1,97,177/- by treating the same to be entertainment expenses because in the earlier years in the case of the assessee-respondent, 50% of expenses were allowed under Section 37(2A) by the Tribunal in I.T.A. No. 1304/Chandi/1988, decided on 15.3.1994, in respect of assessment year 1981-82. Accordingly, the Assessing Officer was directed to allow 50% of the amount of Rs. 1,97,177/- as entertainment expenses. On further appeal of the revenue, the Tribunal has affirmed the order passed by the CIT(A). 7. Having heard learned counsel for the parties we are of the considered view that the matter is no longer res integra and has been answered by Hon’ble the Supreme Court in the case of Prakash Cotton Mills Pvt. Ltd. v. Commissioner of Income Tax (Central) Bombay, (1993) 3 SCC 452. It has been held that which portion of the miscellaneous expenses claimed by an 4 I.T.A. No. 3 of 2002 assessee is deductible as entertainment expenses of the assessee is a matter to be decided by the fact finding authority on the basis of material placed before them. It has further been held that when the fact finding authorities recorded their concurrent findings then no intervention by the High Court would be warranted. Therefore, the determination of 50% of the expenses for allowing the same to be deductible by the CIT(A) followed by affirmation by the Tribunal, would not call for any interference. Accordingly, the question is answered in favour of the respondent-assessee and against the appellant- revenue. Accordingly, the view taken by the Tribunal affirming the view of CIT(A) is upheld. 8. The appeal stands disposed of in the above terms. (M.M. KUMAR) JUDGE (JITENDRA CHAUHAN) April 26, 2010 JUDGE Pkapoor 5 "