Judgment :- N. V. BALASUBRAMANIAN J. In compliance with the directions of this court dated March 14, 1989, the Tribunal referred the following question of law for our consideration under section 256(2) of the Income-tax Act, 1961: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the expenditure incurred on the maintenance of the guest house and the depreciation on the building used as a guest house should be allowed as a deduction ?" The assessee is a public limited company. The assessment year involved is 1978-79. The assessee maintained a guest house at Mettur and incurred certain expenditure amounting to Rs. 30, 528 and also claimed depreciation of Rs. 8, 999 in computing the income of the previous year ended March 31, 1978, relevant to the assessment year 1978-79, The Income-tax Officer disallowed the claim of the assessee with reference to both the amounts, namely, the expenditure as well as the claim of depreciation, The assessee appealed to the Commissioner of Income-tax (Appeals), The Commissioner accepted the claim of the assessee and directed the allowance of the claims. The Appellate Tribunal, on appeal by the Revenue, dismissed the appeal preferred by the Revenue holding that the assessee would be entitled to the claim of deduction of the expenditure as well as the depreciation in computing the income of the assessee. Mr. C. V. Rajan, learned counsel for the Revenue, submitted the Explanation (sic) introduced in sub-section (5) of section 37 of the Income-tax Act is retrospective in nature and, therefore, the assessee is not entitled to deduction of the expenditure claimed or the depreciation claimed by the assessee. Mr. P. P. S. Janarthana Raja, learned counsel, undertakes to file vakalat for the respondent. He submitted that the Explanation (sic) was introduced by the Finance Act, 1983 we are of the view that the expenses incurred by the assessee are allowable in the computation of the business income of the assessee as the guest house maintained by the assessee cannot be regarded as a "guest house" within the meaning of section 37(4) of the Act. We are, therefore, of the view that there is no infirmity in the order of the Appellate Tribunal in holding that the assessee was entitled to deduction of expenditure incurred on the maintenance of the guest house and depreciation of the building used as the guest house. Accordingly, we answer the question of law referred to us in the affirmative and against the Department.