JUDGMENT Devinder Gupta, J.—The Income-tax Appellate Tribunal, Chandigarh Bench has referred the following two questions of law to this Court under section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as the Act):— "1. Whether the Tribunal has been right in law in holding that the expenses amounting to Rs. 49,750 under the heads Hotel bills, travelling and taxi expenses and presentation items for the assessees guests, suppliers and customers fell outside the purview of the provisions of section 37 (2-B) of the Income-tax Act, 1961? Whether the Tribunal has rightly held that Rs 25, 50 as expenditure incurred on eating facilities by the assessee to its customers did not constitute entertainment within the meaning of section 37 (2-B) ?" 2. The facts necessary, in brief, are that the assessee, who is carrying on the business of manufacture and sale of bear, Indian Made Foreign Liquor, Malt, breakfast food and soft drink etc. and has a number of branches at various places, on August 9, 1972, filed its return for the assessment year 1972-73 declaring an income of Rs 2,11,30,600. Assessment under section 143(3) of the Act was done on January 25, 1974, on an income of Rs. 2,17,39,290. The assessee debited an amount of Rs. 2,58,387 as expenditure -under the Head "Entertainment" in its various branches and claimed that an amount of Rs. 1,29,193 was allowable as business expenditure and the balance of Rs. 1,29,193 not allowable, in view of sub-section (2-B) of section 37 of the Act being in the nature of entertainment expenditure. The Income-tax Officer disallowed the entire claim of Rs. 2,58,387 on the ground that the expenses in question were either on the Guest Houses maintained by the assessee or on food and refreshment to its customers, suppliers and others coming to it in connection with business activities. The matter was taken up in appeal to the Appellate Assistant Commissioner by the assessee, who held that out of assessees claim of Rs 1,29,193, half of the amount of Rs. 2,58,387, a sum of Rs. 750 0 represented expenses for the purpose of business and accordingly allowed a sum of Rs. 75,000 out of the said expenses. The assessee accepted the decision in appeal but the revenue came up in further appeal before the Tribunal which upheld the decision of Appellate Assistant Commissioner by dismissing its appeal and holding that the amount of Rs. 750 0 represented expenses for the purpose of business and accordingly allowed a sum of Rs. 75,000 out of the said expenses. The assessee accepted the decision in appeal but the revenue came up in further appeal before the Tribunal which upheld the decision of Appellate Assistant Commissioner by dismissing its appeal and holding that the amount of Rs. 75,000 constituted business expenses. It took the view that the expenses amounting Rs. 49,753 under the Head "Hotel expenses, travelling and taxi expenses and presentation items for the companys Guests, suppliers and customers" fell outside the purview of the provisions of sub-section (2-B) of section 37 and for the balance amount of Rs 25,250, it held that the same was not hit by the provisions of said sub-section as the expenses represented eating facilities provided by the assessee to its customers and the expenses such as these did not constitute entertainment expenses within the meaning of provisions of sub-section (2-B) of section 37 of the Act. The Tribunal, while upholding the allowance of Rs, 25,250, placed reliance upon a decision of Gujarat High Court in Commissioner of Income tax, Gujarat-II v. Patel Brothers and Co. Ltd., (1977) 106 ITR 424 (Guj). 3. The Commissioner of Income-tax sought a reference to this Court and the Tribunal has referred the two questions reproduced above. The learned Counsel appearing for the Revenaa contended that having regard to the phraseology used in sub-section (2-A) and sub-section (2-B) of section 37 of the Act and the wide amplitude of the words "expenditure in the nature of entertainment expenditure" the expenses m question are liable to be disallowed and in support of this contention reliance was placed by him on a decision of the Full Bench of the Kerala High Court in Commissioner of Income-tax, Kerala v. Veeriah Reddiar, (1977) 106 ITR 610 (Ker), which followed the decision of the Allahabad High Court in Brij Raman Dass and Sons v. Commr. of Income-tax, (1976) 104 ITR 541 (All) and also placed reliance upon Commissioner of Income-tax v. M/s-Gheru Lal Bal Chand, (1978) 111 ITR 134 (Punj and Har) Commissioner of Income-tax v. Khem Chand Bahadur Chand, (1981) 131 ITR 336 (Punj and Har), Mysodet (P) Ltd v. Commissioner of Income-tax (1987) 163 ITR 848 (Kar); Chandumull Rajgarhia v. C.I.T. (1987) 167 ITR 433 (Pat), Phool Chand Gajanand v C.I.T. (1989)177 ITR 265 (All), which have followed the decision of Full Bench of Kerala High Court in Reddiars case (supra). 4. The learned Counsel for the assessee contended that the expenditure incurred by the assessee is not liable to be disallowed under sub section (2-A) or sub-section (2-B) of section 37 of the Act as the expenditure was not on a lavish or on extravagant scale but was in the nature of bare necessity and by way of ordinary courtesy and in support of this contention placed reliance upon a decision of the Gujarat High Court in Patel Brothers case {supra) and upon C.I.T. v. Shah Nauji Nagsi, (1979) 116 ITR 292 (Bom), C. I.T. v. Corporation Bank Ltd., (1979) 111 ITR 271 (Kar), Addl. C.I. T v. Maddi Venkataratnam and Co. Ltd., (1979) 119 ITR 514 (AP), C.I.T. v. Kuruppuswamy Nadar and Sons, (1979)120 ITR 140 (Mad), CI.T. v. Lakhmichand Muchhal9 (1982) 134 ITR 234 (MP), and Devi Chand Bastimat v. C.I. T. (1985) 156 ITR 166 (Raj), which have followed the decision of Gujarat High Court in Patel Brothers case (supra). 5. The question which falls for consideration before us is as to whether the amount in question spent by the assessee would come within the expression "expenditure in the nature of entertainment expenditure" occurring in sub-section (2-A) and sub-section (2-B) of section 37 of the Act. To examine and answer the question, it would be necessary for us to go into the legislative history of section 37 of the Act and the object underlying the introduction of sub-section (2-B) of section 37 of the Act. 6. To examine and answer the question, it would be necessary for us to go into the legislative history of section 37 of the Act and the object underlying the introduction of sub-section (2-B) of section 37 of the Act. 6. Any amount spent by an assessee for the entertainment of its business constituents and customers was an allowable expenditure under the head Profits or gains of any business, profession or vocation carried on by an assessee by virtue of section 10 (2) (xv) of Indian Income-tax Act, 1922, on the ground that such hospitality and entertainment is extended wholly for the purposes of promotion of business of the assessee With a view to curb the tendency on the part of the Companies and their directors and executives to entertain on lavish scale at the expenses of the company and thereafter claim the same as entertainment expenses, a proviso was inserted in the year 1961 in section 10 (2) (xv) which provided that no expenditure in the nature of entertainment expenditure shall be allowed in the case of an assessee, other than a company, and in case of companies it provided a deduction on slab basis and a ceiling was put on such expenditure depending on the profits and gains of the business. This amendment was sought to be inserted in the- Act by Finance Bill of 1961 and became an Act on and with effect from April 1, 1962 The second step was taken in the year 1967 by the Taxation Laws (Amendment) Act, 1967, which came into force on and with effect from October 1, 1967, when sub-section (2-A) was introduced in section 37 of the Act whereby in the case of an assessee, other than Companies also, a ceiling on such expenditure was fixed. By Finance Act, 1968, an Explanation (which is now Explanation I) was added to sub-section (2-A) with effect from April 1, 1968, so as to expand the scope of restrictions with a view to cover and include the expenses incurred by an assessee granting entertainment allowance to its employees or other persons and also the expenditure incurred by an employee or other persons for the purposes of assessees business otherwise than out of an allowance paid by the assessee. The next step in this direction was taken by Finance Act of 1970, by inserting sub-section 2-B) in section 37, which prohibited deduction of any expenditure in the nature of entertainment expenditure incurred within India by any assessee after February 28, 1970. Subsection (2-B) of section 37, reads as under: "(2-B) Notwithstanding anything contained in this section, no allowance shall be made in respect of expenditure in the nature of entertainment expenditure incurred within India by any assessee after the 28th day of February, 1970.” Paragraph 27 of the Memorandum explaining the provisions in the Finance Bill, 1970 by which sub-section (2-B) was sought to be inserted in section 37, reads as under:— "With a view to curbing lavish expenditure on entertainment, it is proposed to make a provision for the disallowance of entertainment expenditure incurred in India after 28 2-1970 altogether in computing the profits and gains of business or profession. Entertainment expenditure incurred outside India will continue to be admissible as a deduction subject to the limits already provided in the law” Clause 10 in the Notes on Clauses of the Finance Bill, 1970, by which sub-section (2-B) was inserted reads as under:— “Sub-clause (b) seeks to insert a new sub-section (2-B) in section 37 of the income-tax Act and sub-clause (a) seeks to make a consequential amendment in the Explanation to sub-section (2-A) of that section. Under the proposed amendments, expenditure in the nature of entertainment expenditure incurred by any assessee within India after the 28th February, 1970, will be disallowed in its entirety in computing his income from business or profession." 7. While introducing the Finance Bill, 1970, the Finance Minister observed as under: - "The only significant change is that all entertainment expenditure incurred in India in business and the professions will now be disallowed in computing profits. Similarly, expenditure on guest houses, other than holiday homes for the benefit of employees on leave, will be disallowed. Those who enjoy the hospitality of their business friends should -now no longer find their sense of gratitude diminished by the thought that a part of the hospitality is really paid for by the Exchequer.” 8. Similarly, expenditure on guest houses, other than holiday homes for the benefit of employees on leave, will be disallowed. Those who enjoy the hospitality of their business friends should -now no longer find their sense of gratitude diminished by the thought that a part of the hospitality is really paid for by the Exchequer.” 8. As we find, it is in this background that the object in inserting sub-section (2-B) to section 37 of the Act was to put a curb on tendency of extravagant and lavish entertainment by the assessee thereby providing that all expenditure in the nature of entertainment expenditure incurred within India after February 28, 1970 was to be disallowed. We are concerned, in this case, with the assessment year 1972-73, therefore, subsection (2-B) of section 37 will be fully applicable. It is pertinent to refer at this stage that on and with effect from April 1, 1977, sub-section (2-B) of section 37 was altogether omitted but the legislature in its wisdom reintroducted the same to a limited extent by Taxation Laws (Amendment) Act, 1978 thereby providing a curb on expenditure incurred by an assessee on advertisement in any souvenir, broucher, tract, pamphlet or the like published by a political party. However, the amendment of the year 1978 has no concern with the entertainment expenditure at all. By the Finance Act, 1983, Explanation 2 was added to sub-section (2-A) of section 37 which is to the following effect:— "Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of this sub-section and sub-section (2-B), as it stood before the 1st day of April, 1977, entertainment expenditure includes expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work." In this background, it will be necessary to examine the divergent views on the question of allowing entertainment expenditure. 9. The leading judgment, which supports the assessees view, is that of Gujarat High Court in Patel Brothers case (supra). 9. The leading judgment, which supports the assessees view, is that of Gujarat High Court in Patel Brothers case (supra). Their Lordships adverting to the dictionary meaning of the word "entertainment" and by placing reliance upon some English precedents by way of analogy held as follows:— "We do not think that we would be justified in laying down any formula so as to provide readymade answer to this problem ; but, in the context of legislative intent evinced from the gradual evolution of the present provisions contained in sections 37 (2-A) and (2-B), we venture to indicate a few broad tests so as to facilifate a tax-payer to understand and the revenue to determine the nature of entertainment expenses though in each case in the ultimate analysis it would be a question of fact depending on many factors, more particularly in the absence of a well-defined scheme in the Indian statute The following broad tests, in our opinion, will provide a guideline to determine the nature of expenses allowed to be entertainment expenses : (a) If the provision of food, drinks or any amusement to a client, constituent or customer is on lavish and extravagant scale, or is of wasteful nature, it is entertainment per se (b) If the provision of food or drinks to a client, constituent or customer is in nature of bare necessity, or by way of ordinary courtesy, or as an express or implied terra of contract or employment spelled out from long-standing practice or custom of trade or business, it will not amount to entertainment. (c) If the provision of food or drinks to a client, customer or constituent is in liberal and friendly way, it may amount to entertainment having regard to the place, item and cost of such provision. (d) The provision of amusement to a client, customer or constituent by way of hospitality or otherwise will always be entertainment." 10. This judgment of the Gujarat High Court appears to be the basic judgment, which seems to have found acceptance with some other High Courts as well, which supports the arguments of the learned Counsel for the assessee. A close scrutiny of the judgment would show that instead of considering the compendious phrase "in the nature of entertainment expenditure their Lordships adverted to find out the import and width of the word "entertainment" only. A close scrutiny of the judgment would show that instead of considering the compendious phrase "in the nature of entertainment expenditure their Lordships adverted to find out the import and width of the word "entertainment" only. The legislature instead of using the word "entertainment" or business expenditure" has used a much wider compendious phrase like "expenditure in the nature of entertainment expenditure", therefore, it is this wider phrase which deserves consideration and not the simple words "entertainment" or "business entertainment", as has been interpreted by the Judges of the Gujarat High Court in Patel Brothers9 case (supra). On the Gujarat High Courts view itself, hospitality which is in lavish or extravagant scale is per se entertainment. On a lower scale, there may be extended hospitality, which may neither be necessarily lavish, nor exceptionally pleasurable Even though it may be said that this kind of hospitality does not strictly fall within the ambit of the word entertainment" than can it possibly be denied that it will come within the amplitude of the wider phrase deployed by the legislature "in the nature of entertainment expenditure". Out of the four tests laid down in Patel Brothers case (supra), (a) and (d) have been opined to be entertainment per se by the Full Bench itself and the tests (b) and (c) even though may not be strictly entertainment, would clearly come within the compendious phraseology deliberately used by the Parliament. The observations to the effect that the provisions of food or drink to a constituent or a customer will amount to an entertainment only, that is, on a lavish and extravagant scale or is of a wasteful nature and that every hospitality would not constitute entertainment and not borne out on the true interpretation of the word "expenditure in the nature of entertainment expenditure". The reasonings adopted in coming to the conclusion cannot be applied to each and every case. Something which may be regarded as an ordinary meal by a person may really be regarded as a lavish meal by a common man Such considerations, as are contained in the four tests laid down, introduces a limit of uncertainty in the meaning of phrase used in a statute and has to be avoided. Something which may be regarded as an ordinary meal by a person may really be regarded as a lavish meal by a common man Such considerations, as are contained in the four tests laid down, introduces a limit of uncertainty in the meaning of phrase used in a statute and has to be avoided. The other view which supports the Revenue is based upon two leading judgments, one of the Allahabad High Court in Brij Raman Dass and Sons case (supra) and the other of Full Bench of Kerala High Court in Reddiars case (supra). The Full Bench of the Kerala High Court in Reddiars case dissented from the view taken by the Gujarat High Court in Patel Brothers case (supra). After considering the legislative history, it held as under:— "The expression entertainment expenditure has not been defined in the Act. The words have, therefore, to be construed in accordance with their ordinary and natural meaning. Where the expression admits of more than one connotation the court will prefer that meaning which appears to it to be consistent with the context and setting in which the words have been used in the statute and which would conduce to effectuate the legislative intention. It is important to note that, instead of merely using the expression entertainment expenditure, the words actually used by Parliament in sub-sections (2-A) and (2-B) are expenditure in the nature of entertainment expenditure. The latter expression is much wider in its content inasmuch as it would take within its scope not merely what can strictly be regarded as entertainment expenditure proper but also expenditure of allied nature partaking of some, though rot all, of the characteristics of entertainment expenditure. It appears to us to be beyond doubt that the intention of Parliament in employing the additional words expenditure \n the nature of was to cast the net sufficiently wide as to bring within the scope of the two sub-sections all types of expenditure in respect of which there can be said to be certain elements which invest them with the nature of entertainment expenditure ...,. We are clearly of opinion that in interpreting the expression entertainment expenditure occurring in sub-sections (2-A) and (2-B) of section 37 of the Act the word entertainment should be taken to mean hospitality of any kind extended by the assessee directly in connection with his business or profession." 11. We are clearly of opinion that in interpreting the expression entertainment expenditure occurring in sub-sections (2-A) and (2-B) of section 37 of the Act the word entertainment should be taken to mean hospitality of any kind extended by the assessee directly in connection with his business or profession." 11. The Bench differed from the view of the Gujarat High Court, on the basis of the legislative history as traced above in the earlier part of this judgment and the significance use of the word "expenditure in the nature of entertainment expenditure in both sub-sections (2-A) and (2-B) of section 37 and ultimately held that in interpreting the expression entertainment expenditure occurring in sub-sections (2-A) and (2-B) of section 37 of the Act, the word "entertainment" should be taken to mean hospitality of any kind extended by the assessee directly in connection with his business or profession. 12 A Full Bench of the Punjab and Haryana High Court in Khem Chand Bahadur Chands case (supra) also agreed with the view of Kerala High Court and held that the word "expenditure in the nature of entertainment expenditure" is of a much wider connotation. It dissented from the view of the Gujarat High Court in Patel Brothers case. The decisions of other High Court on which reliance was placed by Revenue also proceed on the reasonings adopted by the Kerala High Court in Reddiars case (supra). 13. The matter can be viewed from another angle also. The controversy, in our opinion, has now been set at rest by the legislative introducing Explanation 2 to sub-section (2-A) of section 37 by Finance Act of 1983 which was made effective with retrospective effect from April 1, 1976. The Explanation has been introduced for the removal of doubts by way of declaration defining entertainment expenditure to include expenditure on provision of hospitality of every kind. This explanation can be safely used for considering the legislative intent. It is well settled that an explanation added to a statutory provision is not a substantive provision in any sense of the term as the plain meaning of the word itself shows, it is merely a mandate to explain or clarify certain ambiguities, which may have crept in the statutory provision. It is well settled that an explanation added to a statutory provision is not a substantive provision in any sense of the term as the plain meaning of the word itself shows, it is merely a mandate to explain or clarify certain ambiguities, which may have crept in the statutory provision. It has been held by the Supreme Court in S. Sundaram v. V. R. Pattabiraman, AIR 1985 SC 582, that :— “ the object of an Explanation to a statutory provision is— (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." 14. From the legislative history and the introduction of Explanation 2 we are of the opinion that the legislature always intended that the entertainment expenditure include expenditure on provision of hospitality of every kind by the assessee. It was in order to resolve the ambiguity that Explanation 2 was added. The intention of the legislature cannot be ascertained from any statement by way of a note on the Clauses of a Bill or brevet and as has been stated, the duty of the court is to find the natural meaning of the words in a statute in the context in which they are used. It has always been considered permissible and even desirable for a court, while interpreting a statute to take not of the history of the statute and the circumstances in which it was passed or the mischief at which it was directed. It has always been considered permissible and even desirable for a court, while interpreting a statute to take not of the history of the statute and the circumstances in which it was passed or the mischief at which it was directed. The reason is that the meaning which is to be given to a statute should be such as will carry out its object. (See : C Veettil Ammad v. Taluk Land Board, AIR 1979 SC 1573. 15. Following the rule in Heydon’s case 1584 (76) ER 637, it appears to us that to construe the true import of sub-section (2-B) of section 37, which starts with a non-obstante clause, it is not only legitimate but convenient to refer both the former Income-tax Act and the state of uncertainity brought about due to conflict of views between the different High Courts that Explanation 2 which seeks to provide remedy by not only explaining but by removal of doubts declaring that entertainment expenditure includes expenditure of provision on hospitality of every kind by the assessee to any person whether by way of provision of food or bewerages or in any other manner whatsoever. 16. In view of the above discussion, we have no hesitation in following the ratio of the decision of the Full Bench of Kerala High Court in Reddiars case (supra). We accordingly answer questions No. 1 and 2 in the negative, that is, in favour of the Revenue and against the assessee. Order accordingly.