Meaning of “Hospitality of every kind by assessee to any person”

The meaning of hospitality of every kind by assessee to any person under section 37(2)/(2A) of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here is an excerpt of the court’s order in which the Hon’ble High Court tried to explain the meaning of hospitality of every kind by assessee to any person.

Meaning of hospitality of every kind by assessee to any person defined by court

The phrase ‘Hospitality of every kind by assessee to any person’ used in section 37(2)/(2A) of the Income Tax Act came up before hon’ble Rajasthan High Court in Modern Threads (India) Ltd. Vs. CIT [2002] 124 taxman 752/258 ITR 511 (RAJ.) and it explained.

Meaning : The words ‘hospitality of every kind by the assessee to any person’ include every type of expenditure on entertainment.

Section 37(2)/(2A) of Income Tax Act

General.

37.(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.

Explanation 1.—For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.

Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

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(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.

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In this article, you can get the guidance from high court on the meaning of hospitality of every kind by assessee to any person under section 37(2)/(2A) of the Income Tax Act.

Updated up to Finance Act 2021.