( 1 ) THE Revenue sought reference under section 256 (1) of the Income-tax Act, 1961 (43 of 1961), for short, "the Act", of six questions of law as follows :" (1) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 17,056 spent by the assessee for hosting dinners to foreign delegation members in order to entertain them in an appropriate and befitting manner is not disallowable under section 37 (2b) of the Income-tax Act, 1961, though it may be for purposes of business ? (2) Whether, on the facts and in the circumstances of the case the amount of Rs. 2,668 spent by Delhi branch of the assessee for providing lunch and dinners to customers is not to be treated as entertainment expenditure and disallowed under section 37 (2b) of the Income-tax Act 1961 ? (3) Whether, on the facts and in the circumstances of the case, a sum of Rs. 1,79,155 debited under the head "business promotion expenses" was not rightly disallowable as expenditure in the nature of entertainment expenditure and also partly as expenditure for maintenance of a guest house, for the stay of foreign guests (and not meant as holiday home for low-paid employees of assessee), under section 37 (2b) and under section 37 (4) of the Income-tax Act ? (4) Whether, on the facts and in the circumstances of this case, the expenditure of RS. 893 paid to various clubs by the assessee for the purpose of entertaining foreign guests is not to be disallowed under section 37 (2b) of the Act ? (5) Whether, on the facts and in the circumstances of the case, the amount of Rs. 22,722 debited by the assessee under the head "entertainment expenditure" spent by it for providing coffee, tea and snacks to customers is not to be treated as expenditure in the nature of entertainment expenditure and disallowed under section 37 (2b) of the Act ? (6) Whether, on the facts and in the circumstances of the case, the amount of Rs. 1,49,965 spent on agmark charges, Rs. 2,14,860 spent on export licences fee and inspection charges, Rs. 1,09,587 paid as premium for export credit guarantee insurance, RS. 11,746 paid as subscription to export promotion council and trade associations, and Rs. 1,732 spent on translation charges are to be treated as items of expenditure eligible for weighted deduction either under sub-clause (ii) or sub-clause (vi) or, sub-clause (vii) of section 35b (l) (b) and the assessee held to be eligible for weighted deduction on these amounts particularly on account of the fact that the services were performed by the payees in India and not outside India ?"

( 2 ) THE material facts, relating thereto, are as follows : The assessee, Navabharat Enterprises (Private) Limited, for short "the Company", is having its head office at Hyderabad and branches at Guntur, New Delhi, Bombay, Calcutta and Cochin, and submitted its return for the assessment year 1973-74, ending the accounting year with 30/06/1972, of an income of Rs. 53,04,333 from ready-business and Rs. 8,060 from forward business. The Income-tax Officer found that a sum of Rs. 17,056 was incurred on account of "special dinners arranged for trade delegations from U. S. S. R. and G. D. R. " and disallowed it on the ground that it represented entertainment expenditure, disallowable under section 37 (2b) of the Act. On appeal by the company, the Appellate Assistant Commissioner held that the expenditure did not partake of the character of business expenditure, so he confirmed the disallowance. On second appeal, the Appellate Tribunal held that trade delegations had come to India from G. D. R. and U. S. S. R. , that the company had close business relationship with those countries and that with a view to promote the business interests of the company, it had incurred the expenditure only to entertain the delegates in an "appropriate and befitting manner". Therefore, it is business expenditure allowable under section 37 (1) of the Act.

( 3 ) THE Income-tax Officer found that a sum of Rs. 2,668 inc