JUDGMENT
R.C. Mankad, J.
1. The Income-tax Appellate Tribunal has referred to us for our opinion, the following questions under section 256(1) of the Income-tax Act, 1961 (“the Act” for short) :
“(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing the Income-tax Officer to recompute the capital employed without deducting the current liabilities and redetermined the deduction admissible to the assessee under the provisions of section 80J and rule 19A of the Income-tax Rules ?
(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that, except for the amount of Rs. 3,029 the balance of the expenses of Rs. 24,307 were not hit by the provisions of section 37(4) of the Income-tax Act, 1961, and, consequently, were allowable under section 37(1) of the Act ?
(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law applying the tests laid down in the decision of the Gujarat High Court in the case of Patel Bros. [1977] 106 ITR 424 in granting deduction of the impugned expenditure of Rs. 24,307 ?
(4) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that expenditure to the extent of Rs. 3,029 was hit by section 37(4) as being expenditure in the nature of maintenance of guest house ?
(5) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting the amount of Rs. 24,000 on the ground that no part of the said expenditure was disallowable as entertainment expenditure under section 37(2B) of the Income-tax Act, 1961 ?
(6) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the assessee was entitled to depreciation on the cost of roads treating them as ‘plant’ ?
(7) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the amount of Rs. 22,587 being the written down value of the approach road was includible in computing the value of fixed assets ?”
2. It is not necessary for us to set out the facts involved in this reference so far as questions Nos. 1 to 3 and 5 to 7 are concerned since they are covered by binding decisions. So far as question No. 1 is conquered, it is directly covered by the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308. Following the said decision, question No. 1 is answered in the negative and against the assessee. So far as questions Nos. 2,3 and 5 are concerned, they are covered by the decision of this court in CIT v. Patel Brothers and Co. Ltd. [1977] 106 ITR 424. Following the said decision, we answer questions Nos.2, 3 and 5 in the affirmative and in favour of the assessee. Questions Nos. 6 and 7 are covered by the decision of this court in the assessee’s case for the assessment year 1966-67 which is reported in [1986] 162 ITR 496 (Kaira District Co-operative Milk Producer’s Union Ltd. v. CIT). Following the said decision, we answer question No. 6 in the negative and against the assessee. We may, however, make it clear that though the Income-tax Appellate Tribunal was not right in holding that the assessee entitled to depreciation on the cost of approach roads treating them as plant, the them as building. The depreciation shall, therefore, have to be worked out accordingly. In view of this direction which is given following the decision in the assessee’s case for the assessment year 1966-67 referred to above, it must be held that the assess is entitled to the inclusion of the written down value of the approach roads in computing the value of fixed assets. The written down value shall, however, have to be worked out again in view of the direction given above. Question No. 7 shall, therefore, stand answered accordingly.
3. Now, so far as question No. 4 is concerned, the facts are as follows : The assessee had claimed quest house expenses of Rs. 27,336. The claim was disallowed both by the Income-tax Officer as well as the Appellate Assistant Commissioner on the ground that the said expenditure was hit by the provision of section 37(4) of the Act. In appeal, however, the Tribunal restricted the disallowance to Rs. 3,029 which related to waterproofing work on the terrace of the guest house. So far as the balance of the expenditure was concerned, the Tribunal held that the expenditure was incurred out of commercial expediency to meet customary hospitality. It may be mentioned here that the said expenditure was incurred for providing lunch or dinner to visitors, employees and technicians who visited the factory. The expenses other than Rs. 3,029 which were incurred for waterproofing work on the terrace are the subject-matter of questions Nos. 2, 3 and 5 which we have already answered above following the decision of this court in CIT v. Patel Brothers and Co. Ltd. [1977] 106 ITR 424. Now, so far as the expenditure of Rs. 3,029 incurred for the waterproofing work of the terrace is concerned, in our opinion, such expenditure would be covered by section 30(a)(ii) of the Act. In other words, deduction of such expenditure is allowable under the said provision. Therefore, such expenditure cannot be disallowed under the provisions of section 37(4) of the Act. A similar view was taken by the Bombay High Court in the case of CIT v. Chase Bright Steel Ltd. [1989] 177 ITR 124. We, therefore, answer question No. 4 in the negative and against the Revenue.
4. Reference answered accordingly with no order as to costs.