Section 37

46. See 9B for computation of deduction in respect of expenditure on production of feature films/expenditure on acquisition of distribution rights of film.

47. See also Letter [F. No. 27(30)-IT/59], dated 6-7-1959, Letter [F.No. 9/54/64-IT(A-I)], dated 2-9-1964, Letter [F. No. 9/56/66-IT(A-I)], dated 17-1-1967, Letter [F.No. 9/23/67-IT (A-I)], dated 6-7-1967, Circular No. 5-P(XIV-I), dated 28-9-1963, Letter [F. No. 10/67/ 65-IT(A-I)], dated 26-8-1965, Circular No. 16, dated 18-9-1969, Circular No. 64(XI-2), dated 27-1-1951, Circular No. 117, dated 22-8-1973, Letter [F. No. 10/25/63-IT(A-I)], dated 18-6-1964, Letter [F. No. 204/42/77-IT(A-II)], dated 28-9-1977, Circular No. 1-D(IV-53), dated 20-1-1966, Circular No. 2, dated 8-3-1946, Letter [F. No. 35/5/65-IT(A-I)], dated 1-7-1965, Circular No. 69(XIX-3), dated 27-11-1951, Circular No. 4, dated 19-6-1950, Letter [F. No. 10/80/64-IT(A-I)], dated 26-2-1965, Letter [F. No. 10/92/64-IT(A-I)], dated 13-9-1965, Circular No. 3, dated 26-3-1946, Circular No. 22, dated 23-6-1943, Letter [F. No. 10/16/63-IT(A-I)], dated 14-5-1963, Letter [F. No. 10/8/63-IT(A-I)], dated 14-10-1963, Letter [F. No. 27(24)-IT/59], dated 19-5-1959, Letter [F. No. 7/33/62-IT(A-I)], dated 28-8-1963, Circular No. 2-P(XI-6), dated 23-8-1965, Letter [F. No. 13A/20/68-IT(A-II)], dated 3-10-1968, Letter [F. No. 32/6/62-IT(A-I)], dated 16-1-1963, Extracts from the minutes of the 16th meeting of CDTAC held on 2-2-1972, Instruction No. 943 [F. No. 204/15/76-IT(A-II)], dated 2-4-1976, Circular No. 420, dated 4-6-1985, Circular No. 2(40)/66-EAC, dated 16/17-1-1967, issued by the Ministry of Commerce, Circular No. 42 [C. No. 19(7)-IT/42], dated 22-8-1942, Circular No. 36 [R. Disc. No. 54(13)-IT/43], dated 24-11-1943, Circular No. 48 [C. No. 19(22)-IT/42], dated 16-10-1942, Circular No. 192, dated 10-3-1976, Circular No. 316, dated 30-9-1981, Board’s Circular Letter No. 10/22/65 IT(A-I), dated 24-5-1965, Circular No. 651, dated 11-6-1993, Circular No. 671, dated 27-10-1993, Press Release, dated 23-1-2001, Instruction No. 12/2006, dated 14-12-2006 and Circular No. 6/2007, dated 11-10-2007. For details, see Taxmann’s Master Guide to Income-tax Act.

48. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.

49. For the meaning of the term "expenditure", see Taxmann’s Direct Taxes Manual, Vol. 3.

51. For the meaning of the expressions "capital expenditure", "wholly and exclusively" and "for the purposes of the business", see Taxmann’s Direct Taxes Manual, Vol. 3.

52. Inserted by the Finance (No. 2) Act, 1998, w.r.e.f. 1-4-1962.

53. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Omitted sub-section (2) was substituted for sub-sections (2) and (2A) by the Finance Act, 1992, w.e.f. 1-4-1993. Erstwhile sub-sections (2) and (2A) as amended by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962, the Finance Act, 1965, w.e.f. 1-4-1965, the Taxation Laws (Amendment) Act, 1967, w.e.f.  1-10-1967, the Finance Act, 1968, w.e.f. 1-4-1968, the Finance Act, 1970, w.e.f. 1-4-1970, the Finance Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1983, w.r.e.f. 1-4-1976/w.e.f. 1-4-1984. Prior to its omission, sub-section (2), as substituted by the Finance Act, 1992, w.e.f. 1-4-1993, and later on amended by the Finance Act, 1994, w.r.e.f. 1-4-1993, read as under :

      ‘(2) Notwithstanding anything contained in sub-section (1), any expenditure  in the nature of entertainment expenditure incurred by any assessee during any previous year commencing on or after the 1st day of April, 1992 shall be allowed as follows :

 (a)  where the amount of such expenditure does not exceed ten thousand rupees, the whole of such amount;

 (b)  in any other case, ten thousand rupees as increased by a sum equal to fifty per cent of such expenditure in excess of ten thousand rupees.

      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 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.’

54. Inserted by the Taxation Laws (Amendment) Act, 1978, w.e.f. 1-4-1979. Originally, the sub-section was inserted by the Finance Act, 1970, w.e.f. 1-4-1970 which was later on omitted by the Finance Act, 1976, w.e.f. 1-4-1977.

55. See Circular No. 203, dated 16-7-1976, Circular No. 200, dated 28-6-1976 and Circular  No. 19, dated 13-6-1969. For details, see Taxmann’s Direct Taxes Circulars.

56. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its omission, sub-section (3), as inserted by the Finance Act, 1964, w.e.f. 1-4-1964, read as under :

      "(3) Notwithstanding anything contained in sub-section (1), any expenditure incurred by an assessee after the 31st day of March, 1964, on advertisement or on maintenance of any residential accommodation  including any accommodation in the nature of a guest-house or in connection with travelling by an employee or any other person (including hotel expenses or allowances paid in connection with such travelling) shall be allowed only to the extent, and subject to such conditions, if any, as may be prescribed."

57. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3A) was inserted by the Finance Act, 1983, w.e.f. 1-4-1984. Original sub-section was inserted  by the Finance Act, 1978, w.e.f. 1-4-1979 and was later omitted by the Finance (No. 2) Act, 1980, w.e.f.  1-4-1981.

58. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3B) was inserted by the Finance Act, 1983, w.e.f. 1-4-1984. Original sub-section was inserted by the Finance Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f.  1-4-1981.

59. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3C) was inserted by the Finance Act, 1983, w.e.f. 1-4-1984. Original sub-section was inserted by the Finance Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f.  1-4-1981.

60. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3D) was inserted by the Finance Act, 1983, w.e.f. 1-4-1984. Original sub-section was inserted by the Finance Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f.  1-4-1981.

61. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its omission, sub-section (4), as inserted by the Finance Act, 1970, w.e.f. 1-4-1970, read as under :

      ‘(4) Notwithstanding anything contained in sub-section (1) or sub-section (3),—

  (i)  no allowance shall be made in respect of any expenditure incurred by the assessee after the 28th day of February, 1970, on the maintenance of any residential accommodation in the nature of a guest-house (such residential accommodation being hereafter in this sub-section referred to as "guest-house");

 (ii)  in relation to the assessment year commencing on the 1st day of April, 1971, or any subsequent assessment year, no allowance shall be made in respect of depreciation of any building used as a guest-house or depreciation of any assets in a guest-house:

      Provided that the aggregate of the expenditure referred to in clause (i) and the amount of any depreciation referred to in clause  (ii) shall, for the purposes of this sub-section, be reduced by the amount, if any, received from persons using the guest-house :

      Provided further that nothing in this sub-section shall apply in relation to any guest-house maintained as a holiday home if such guest-house—

 (a)  is maintained by an assessee who has throughout the previous year employed not less than one hundred whole-time employees in a business or profession carried on by him; and

 (b)  is intended for the exclusive use of such employees while on leave.

      Explanation.— For the purposes of this sub-section,—

  (i)  residential accommodation in the nature of a guest-house shall include accommodation hired or reserved by the assessee in a hotel for a period exceeding one hundred and eighty-two days during the previous year; and

 (ii)  the expenditure incurred on the maintenance of a guest-house shall, in a  case where the residential accommodation has been hired by the assessee, include also the rent paid in respect of such accommodation.’

62. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Prior to its omission, sub-section (5), as inserted by the Finance Act, 1983, w.r.e.f. 1-4-1979, read as under :

      "(5) For the removal of doubts, it is hereby declared that any accommodation, by whatever name called, maintained, hired, reserved or otherwise arranged by the assessee for the purpose of providing lodging or boarding and lodging to any person (including any employee or, where the assessee is a company, also any director of, or the holder  of any other office in, the company), on tour or visit to the place at which such accommodation is situated, is accommodation in the nature of a guest-house within the meaning of sub-section (4)."