AJIT K. SENGUPTA, J.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the Tribunal has referred the following three questions :"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in allowing the expenses relating to food, tiffin and salary paid to guest house staff and depreciation on assets used in the assessee's guest houses

( 2 ) WHETHER, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in treating the contribution to the Molasses Storage and Maintenance Reserve created under the Uttar Pradesh Sheera Niyatran (Sansodhan) Adesh, 1974, as a revenue expenditure ?

( 3 ) WHETHER, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the assessee-company was entitled to deduction under Section 80g in respect of the donation to Vishwa Mangal Trust ?" 2. Shortly stated, the facts are that the assessment year involved is 1978-79. The assessee-company claimed deduction for expenses incurred for providing food, tea, tiffin, etc. , to visitors and customers who stayed in its tour guest houses at Seohara and Marhourah. The Income-tax Officer disallowed such expenses being the sum of Rs. 30,649. There was a further disallowance made by the Income-tax Officer of a sum of Rs. 26,975 being the salary paid to the guest house staff of the assessee. Thus the total aggregate disallowance on account of the guest houses was Rs. 57,628 made under Section 37 (4) of the Act. There was yet another disallowance of Rs. 993 being the depreciation claimed on the fixed assets used in the assessee's guest house. 3. The Commissioner of Income-tax (Appeals) deleted the entire addition of Rs. 57,628 as also Rs. 993, the sum which the Assessing Officer disallowed out of the claim for depreciation. On further appeal by the Revenue, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) in this regard by following its earlier order in the assessee's own case for the assessment year 1977-78. The Revenue's case as urged before us is that Sub-section (4) of Section 37 inserted by the Finance Act, 1970, with effect from April 1, 1970, has imposed a blanket prohibition against the allowance of any expenditure incurred by the assessee after February 28, 1970, on the maintenance of any residential accommodation in the nature of a guest house as well as the allowance of depreciation in respect of any building used as a guest house or depreciation of any asset in the guest house. It is not the assessee's case that the expenses are not for guest houses maintained by the assessee. Therefore, it is urged by learned counsel appearing for the Revenue that the disallowances were correctly made by the Income-tax Officer.

( 4 ) WE find that the submissions made on behalf of the Revenue have strong force. The assessment order clearly indicates that the disallowance is made by invoking Sub-section (4) of Section 37. The said provisions are extracted below :" (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

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