The benefit of Section 37(2-A) of the Income Tax Act, 1961 cannot be claimed for different sources of income falling under separate heads, and the apportionment of the allowance should be based on the relevant heads of income.

( 1 ) IN this Reference Case, the Tribunal somewhat strangely has referred the following question for answer by us under Section 256 (1) of the income Tax Act, 1961 (for short 'act'):"whether on the facts and in the circumstances of the case, the Appellate tribunal is justified in holding that the limit of - permissible deduction of entertainment expenditure under Section 37 (2-A) should be applied not only with reference to the income computed under Section 28, but also taking into account the income computed under the head "interest on securities", if the securities are held as stock-in-trade?"

( 2 ) FOR the assessment year 1978-79, the assessce Vysya Bank Limited, Bangalore claimedthat in determining the limit of permissible deduction under Section 37 (2-A), the limit stated therein should be applied not only with reference to the income to be computed under Section 28 under the head "profit and gains of business" before the allowance of such expenditure, but also taking into account the income computed under the head "interest on securities". The Income-tax officer repelled that contention and allowed the relief of Rs. 5,000/- as entertainment expenditure under Section 37 (2-A) of the Act as against the claim made in the sum of Rs. 81,109/ -. On appeal to the Commissioner, the Commissioner of Appeals held that section 37 (2-A) provided that a deduction under that Section shall be determined on the basis of the income assessable under the head "profits and gains from business" and notwithstanding in what manner the expenditure is apportioned between business income and interest on securities, the deduction under Section 37 (2-A) should be wholly determined by the income under the head "profits and gains from business", and the entertainment expenditure admissible, he held, was Rs. 11,157/ -. He therefore directed the Income-tax Officer to consider the sum of Rs. 11,157/- for allocation between business income and interest on securities. Not being satisfied with that order, assessee appealed to the Appellate Tribunal. It was urged that interest on securities are quired to be charged under specific head because of the provisions of the Act, but that would not alter the character of such income as income arising from profits and gains of the business carried on by the Assessee which is a Banking concern. Therefore, reliance was placed on the decision of the Supreme Court in the case of Commissioner of Income Tax v Cocanada Radhaswami bank Ltd. , 57 ITR 306. As against that contention, the Revenue - before the Tribunal contended that the decision of the High Court of madras in the case of Commissioner of Income taxes v Indian Overseas Bank, 123 ITR 790 was more to the point and directly on the question and therefore, the view taken by the Commissioner of Appeals was correct and did not call for interference. On such rival contentions, the tribunal appears to have come to the conclusion that the Commissioner of Appeals should have ascertained as to the manner in which the securities were held as investment made by it i. e. , stock in trade or in some other capacity. Nevertheless, after setting aside the order of the Commissioner, the Tribunal has referred the question to us as extracted earlier in the course of this order.

( 3 ) WE find that the Tribunal was not correct in directing the Commissioner to ascertain the character and nature of the holding by the Bank of the securities because, admittedly, the income derived was shown as the income in the Bank in the course of its business. If that was not disputed, then the security belonged to the Bank and investments made by it in the course of its business. There was no reason to investigate the fact as to in what manner securities came to be secured or acquired.

( 4 ) IN the relevant assessment year, it is not in dispute before us, that the income under securities fell under Section 14 (B) while the other income from banking business - other than the inves