Gokal Chand Mital, J.

1. Whether serving of tea, refreshment or lunch during meetings of the directors of the company or the corporation would be allowable as an expenditure under Section 37(1) or would be in the nature of entertainment expenditure covered by Section 37(2A) where ceiling has been placed in allowing the expenditure is the question to be resolved.

2. The Haryana Financial Corporation Ltd., Chandigarh, filed its return for the assessment year 1974-75 and therein claimed expenses of Rs. 16,745 for providing lunch and other refreshments to its directors and other persons during meetings. On scrutiny, the Income-tax Officer found that most of the items pertained to tea and lunch served on different occasions which, according to him, were expenses on entertainment. He further found that some expenses were not connected with the business of the assessee. He disallowed Rs. 10,000 on an estimate basis.

3. On appeal, the Appellate Assistant Commissioner came to the conclusion that the expenditure to the tune of Rs. 2,055 could be said to be spent on entertainment or refreshment/lunch to customers/loanees. Out of Rs. 10,000, he disallowed the addition of Rs. 7,500.

4.