High Court Of Rajasthan : Jaipur Bench
CIT vs. State Bank Of Bikaner And Jaipur
Mrs. Gyan Sudha Misra & Dr. Vineet Kothari, JJ.
IT Ref. No. 69 of 1981
6th July, 2006
Counsel Appeared : Mrs. Parinitoo Jain, for the Revenue : P.K. Kasliwal, for the Assessee
By the court :
This reference has been made by the Tribunal, Jaipur Bench, Jaipur, by order dt. 29th Jan., 1981, to answer as to whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expenses of Rs. 1,71,791 (rupees one lakh seventy-one thousand seven hundred ninety-one only) could be termed as entertainment expenses or could be treated as business development expenses. The aforesaid question arose as the respondent State Bank of Bikaner and Jaipur (for short as “the SBBJ”) had claimed Rs. 1,71,791 as expenses towards entertainment since it was claimed as business development expenditure wholly allowable on the premise that the bank had to entertain the customers and other visitors who visited the bank, and had to be entertained and this was essentially for the development and promotion of business of the bank. The Tribunal decided the question in favour of the respondent assessee as it was held that although a sum of Rs. 1,71,791 has been claimed as expenditure on entertainment to be treated as business development expenditure, it could not be held to be exorbitant as this amount had to be distributed towards 400 branches of SBBJ and if this amount is bifurcated branch-wise, then the average monthly expenditure by each branch towards entertainment would come to Rs. 25 to 30 only and, therefore, it was held by the Tribunal that this amount was reasonable to be claimed towards entertainment and it had to be treated towards business development and was held allowable expenditure. The appeal of the assessee was thus allowed.
The Department of Income-tax under the old provisions of the IT Act filed an application for reference of the matter before the High Court as no appeal at that point of time in the year 1980 was provided under the Act and, therefore, the aforesaid question of law was referred to this Court wherein the question arose as to whether a sum of Rs. 1,71,791 could be termed as entertainment expenses towards business development or it had to be treated as entertainment expenditure allowable subject to limits prescribed under the Act. Having heard learned counsel for the parties and on a perusal of the order of the Tribunal, we do not feel that the Tribunal was justified in even referring the matter to this Court as it was fit to be rejected by the Tribunal itself since the Tribunal seems to have ignored the fact that the Tribunal had given cogent and convincing reason while allowing the expenses towards entertainment expenditure as business development expenditure since the amount of Rs. 1,71,791 is not an expenditure in just one branch of SBBJ but it has been spent by 400 branches of the respondent-bank which has rightly been held to be reasonable and not exorbitant or lavish in any manner. It is no doubt true that if the expenditure on entertainment by the assessee could be treated as lavish expenditure or flashy in any manner, the same cannot be treated as expenditure towards business development even if that has been spent on entertainment but this question obviously will have to be decided on the facts of each case and merely because the expenses incurred in this reference by the respondent assessee are Rs. 1,71,791, the same cannot be treated as a precedent for other years as it is the assessing authority who will have to use his judicious discretion to decide as to whether any amount claimed towards entertainment could be treated towards business development could be so as it has been in the instant matter.
We are of the view that the sum of Rs. 1,71,791 incurred on the entertainment of customers or other visitors by 400 branches in the entire State cannot be treated lavish in any manner and, therefore, we do not feel that the Tribunalâs reference was justified. The reference is answered in the negative against the Revenue and the matter thus be treated as disposed of. Accordingly, this matter is disposed of.
[Citation : 294 ITR 499]