S.S.Sandhawalia, J.

1. The precise amplitude of the phrase "in the nature of entertainment expenditure" designedly employed by the Legislature in Sub-sections (2) and (2A)of Section 37 of the I.T. Act, 1961, is the somewhat ticklish question which has necessitated this reference to the Full Bench in view of a conflict of precedent both within and without this court.

2. The issue aforesaid arises from matters mundane. The respondent-assessee, M/s. Khem Chand Bahadur Chand, is a registered firm consisting of four partners and carries on the business of ahrat with its head office at Abohar and branches at Delhi, Sirsa, Dhaban Kokrian, Khuben and Tappa Khera, which places are scattered in the States of Punjab, Haryana and the Union territory of Delhi. For the relevant assessment year 1970-71, the ITO computed the total income of the assessee at Rs. 61,173 against the returned income of Rs. 41,030, The assessee had claimed deductions under the head of "Kitchen expenses " both in the head office and in the Sirsa and Khuben branches accounts. The ITO, however, applied the alternative limit of Rs. 5,000 laid down in item (i) Section 37(2A) of the I.T. Act, 1961 (hereinafter called "the Act"), treating the kitchen expenses as being in the nature of entertainment expenditure and disallowed the balance claimed by the assessee under the aforesaid head. The respondent-assessee went up in appeal to the AAC, who took the view that the term "kitchen expenses" was a composite one including within it both "extertainment expenses" and "non-entertainment expenses". He, therefore, reduced the disallowance from Rs. 5,800 to Rs. 3,000 in the head office account and in the branch office accounts from Rs. 3,096 to Rs. 1,000 and Rs. 1,937 to Rs. 500 in the Sirsa and Khuben branches of the firm, respectively.

3. On second appeal before the Income-tax Appellate Tribunal, it was, inter alia, contended on behalf of the assessee that along with "kitchen expenses" even items of tea, cigarette, pan and bidi had been treated by the AAC as amounting to "entertainment expenditure" and this was not correct because all these could not be said to be lavish in nature or being an expenditure incurred on items which could pleasurably or amusingly hold the attention of the person served therewith as the expression " entertainment" connotes. So far as the question of some of the expenses being unvouched was concerned the Tribunal accepted the stand of the assessee that it was just not practicable to obtain receipts in respect of milk, vegetables, spices, etc., purchased in non-bulk quantities from time to time. On the aforesaid broad line of reasoning, the Tribunal deleted the addition of Rs. 3,000, Rs. 1,000 and Rs. 500 which had been sustained by the AAC.

4. The other dispute with which we are not presently concerned related to four items of bad debts in respect of which deduction had been claimed by the assessee and disallowed by the department. Consequently, the following two questions were referred to the High Court for its opinion :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the expenses of Rs. 4,500 allowed by it under the head Kitchen expenses were not in the nature of entertainment expenses ?

2. Whether, on the facts and in the circumstances of the case, the Tribunals finding that the debts due by (i) Bhola Ram, (ii) Manghu Ram, and (iii) Jagdish Chemical Works, were established to have become bad, is perverse because of presumption having been wrongly raised against the department ?"

5. When the matter came up before the Division Bench, it noticed that on the first question there was an apparent conflict of authority between the two Division Bench judgments of this court, i. e., CIT v. Gheru Lal Bal Chand [1978] 111 ITR 134 and CIT v. Nadh Shah Kapur & Sons [1980] 122 ITR 972, and, therefore, referred the matter to the Full Bench.

6. At the very outset it may be mentioned that as regards que