Judgment :- N.V. BALASUBRAMANIAN, J. The following questions of law have been referred to us for our opinion with reference to the income of the assessee for various assessment years ranging from 1970-71 to 1979-80 TC Nos. 789 to 795 of 1987 "Whether, on the facts and in the circumstances of the case, and having regard to the provisions of s. 37(4) of the IT Act, the Tribunal was right in holding and had valid materials to hold that the circuit house maintained by the assessee was not a guest house and that the expenditure on such house and depreciation could not be disallowed under s. 37(4)(i) of the IT Act, 1961, in the assessment for the asst. yrs. 1970-71 to 1976-77 ?" TC Nos. 590 and 591 of 1987 " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to depreciation on roads inside the factory ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for the allowance of expenditure incurred on maintenance of circuit house and depreciation thereon ?" TC No. 682 of 1987 " Whether, on the facts and in the circumstances of the case, and having regard to the provisions of s. 37(4) of the IT Act, 1961, the Tribunal was right in holding and had valid materials to hold that the circuit house maintained by the assessee was not a guest house and that the expenditure on such building and depreciation could not be disallowed under s. 37(4)(i) of the Act ?". 2. In this batch of tax case referred at the instance of the Revenue, the common question that is involved is whether the circuit house maintained by the assessee cannot be regarded as a guest house within the meaning of s. 37(4)(i) of the IT Act, 1961 (hereinafter to be referred to as 'the Act'). Insofar as asst. yrs. 1978-79 and 1979-80 are concerned, there is an additional question regarding the claim of the assessee of depreciation on roads inside the factory. Insofar as that question is concerned, the question is concluded against the Revenue by the decision of the Supreme Court in the case of CIT vs. Gwalior Rayon Silk Mfg. Co. Insofar as asst. yrs. 1978-79 and 1979-80 are concerned, there is an additional question regarding the claim of the assessee of depreciation on roads inside the factory. Insofar as that question is concerned, the question is concluded against the Revenue by the decision of the Supreme Court in the case of CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd., and following the said decision, we answer that question in the affirmative and against the Revenue. 3. Then, what remains is the common question whether the circuit house of the assessee can be regarded as guest house or not. The assessee is a public sector undertaking at Neyveli and the assessee maintained a premises styled as circuit house and it is a residential accommodation. According to the assessee, it maintains the circuit house for its business purpose and it is occupied by those who come to Neyveli for business dealings with the assessee. The ITO for all the assessment years in question held that the circuit house is nothing but a guest house within the meaning of s. 37(4) of the Act. The AAC confirmed the view of the ITO. The Tribunal, after noticing the budget speech of the Finance Minister rendered when the particular provision was introduced and the memo explaining the provisions of the Act came to the conclusion that the circuit house maintained by the assessee was not a guest house. The Tribunal recorded a finding that the assessee maintained the premises for the persons coming to Neyveli for transacting business with the assessee-company and such facility was essential because the people coming from outside for transacting business with the assessee had no other place to stay. Therefore, the Tribunal came to the conclusion that the visit of the persons was for transacting business with the assessee and the persons had come to a place where no facility was available for accommodation, and the accommodation provided to the businessmen could not be regarded as coming within the purview of 'guest house'. According to the Tribunal the accommodation provided by the assessee to a businessmen, with whom the assessee generally transacts the business, when the visit was not for transacting the business, it would be in the nature of guest house. According to the Tribunal the accommodation provided by the assessee to a businessmen, with whom the assessee generally transacts the business, when the visit was not for transacting the business, it would be in the nature of guest house. In this view of the matter, the Tribunal held that the accommodation maintained by the assessee was not a guest house and, therefore, the prohibition imposed under s. 37(4) of the Act would not apply. 4. The Tribunal, on the application filed by the Revenue for various assessment years, stated a case and referred the common questions of law set out earlier. 5. Mr. C. V. Rajan, learned counsel for the Revenue submitted that in view of the clear finding of the Tribunal, the accommodation is meant for strangers though they may visit Neyveli for business or non-business purposes, the accommodation should be regarded as guest house. 6. Mr. S. A. Balasubramanian, learned counsel for the assessee, on the other hand, submitted that Neyveli is situate in a remote place in the State of Tamilnadu and the assessee had to provide accommodation to those persons who come to transact business with the assessee and the accommodation provided cannot be regarded as guest house, in view of the remoteness of the place in which the industrial establishment is situate. He submitted that the assessee has also provided accommodation to its employees and collected certain charges also from the persons who have come and stayed for the purpose of transacting business with the assessee. He, therefore, submitted that the accommodation cannot be regarded as guest house. 7. We have carefully considered the submissions of the learned counsel. This Court in CIT vs. Aruna Sugars Ltd., considered the expression 'guest house' under s. 37(3) of the Act and held that where any accommodation is maintained either in the principal place of business or in a place where the factory is located for the directors and other employees of the assessee-company who have to visit if for the purpose of the company's business, the accommodation cannot be regarded as guest house. Similarly, the stay by an official on a visit to the factory for the purpose of enforcing the laws applicable to the factory cannot be regarded as a visit by an outsider as the accommodation was used by him in connection with the company's work. Similarly, the stay by an official on a visit to the factory for the purpose of enforcing the laws applicable to the factory cannot be regarded as a visit by an outsider as the accommodation was used by him in connection with the company's work. This Court held that it is only with reference to other categories like strangers, if the accommodation is provided, the accommodation can be called a guest house. This Court held that guest house means a place for reception of strangers and the employees cannot be treated as strangers. This Court also took the view that it is the duty of the assessee to maintain the register provided under r. 6C of the IT Rules, 1962 and unless it is established from the registers that the guest house has not been exclusively used by the employees, the ITO would not be justified in rejecting the claim for deduction on the expenditure. 8. The Calcutta High Court in the case of CIT vs. Parshva Properties Ltd., held that the guest house as envisaged in s. 37(4) of the Act is a place where guests are received and entertained gratuitously or at a concessional rate. Learned counsel for the assessee submitted that the facts found by the Calcutta High Court are similar to the facts found in the assessee's case as the bungalow was situate in a remote place in the State of Bihar in the case considered by the Calcutta High Court. Learned counsel for the assessee, placing reliance on the decision of the Calcutta High Court submitted that since the assessee has maintained the circuit house not for gratuitous service, the accommodation cannot be regarded as guest house. We are of the opinion that the decision of Calcutta High Court is not applicable to the facts of the case as on the facts it was found by the Court that the accommodation was used by the employees, its auditors, its engineers and other Government officials who went there on duty and stayed there temporarily for doing duty. On the other hand, on the facts found by the Tribunal in the instant case, the persons who are complete strangers came to occupy the accommodation at the time when they came to transact business with the assessee. On the other hand, on the facts found by the Tribunal in the instant case, the persons who are complete strangers came to occupy the accommodation at the time when they came to transact business with the assessee. A similar view were also taken by the Calcutta High Court in the case of CIT vs. Orient Paper Mills Ltd., and the learned counsel for the assessee submitted that the facts are also similar as the accommodation was not maintained for entertainment or relaxation. We are of the opinion that the above decision of the Calcutta High Court is also not applicable, as in the case before the Calcutta High Court, the assessee had provided boarding and lodging facilities on payment of charges by the persons using the accommodation and the entire expenditure was recovered from the persons utilising the said accommodation. A similar view was also taken in another decision of Calcutta High Court in the case of CIT vs. Hindustan Aluminium Corpn. Ltd. 9. Learned counsel for the assessee also brought to our attention an order passed by the Supreme Court rejecting a SLP against the order of this Court in TCP 75 of 1983 dt. 18th July, 1983. We have perused the order in TCP 75 of 1983. That order of this Court clearly shows that 10 per cent of the total expenditure was incurred on third parties and 90 per cent was incurred in the guest house in connection with the stay of people having business connection with the assessee. This Court held that the estimate made by the Tribunal was a question of fact. It is seen from the facts of the case that the expenditure was incurred in connection with the employees or directors or persons who came to stay in the place in connection with the enforcement of the law, and it is not clear whether it related to the persons who stayed in the guest house in connection with the business dealings of the company. 10. The Andhra Pradesh High Court has taken a similar view in the case of CIT vs. Coramandel Fertilisers Ltd. wherein the High Court held that the finding that the accommodation maintained by the assessee was used only by the executives of the company as a transit accommodation and the accommodation cannot be regarded as guest house was held to be a question of fact. 11. 11. In our opinion, the decision of this Court in CIT vs. Aruna Sugars Ltd. (supra) is applicable and where the accommodation was provided by the company to its directors and employees or the persons who came and stayed for the purpose of enforcement of the law applicable to the factory, then the accommodation cannot be regarded as guest house and if the accommodation is meant for strangers, the accommodation should be regarded as guest house. The persons for whom accommodation was provided by the assessee would be strangers and they cannot be regarded as a part of the assessee's establishment because they came to assessee's place of business to transact business with the assessee. Their purpose of visit to the assessee's place may be to transact business with the assessee but that would not make them as a part of the assessee's establishment and it is well known that the business dealings are based purely on trading relationship and they cannot be equated to an employee drawing salary or a director. It may be true that the dealings with such persons would be beneficial and essential for the business carried on by the assessee-company and the expenditure incurred on the accommodation might have been incurred on commercial expediency and allowable as a business expenditure but for the prohibition imposed by the statute against the allowance. 12. The purpose of s. 37 of the Act is to regulate the deduction of such business expenditure and if the accommodation is merely provided to a stranger who came and stayed there for his personal use or his personal recreation, the amount claimed may not be allowable as business expenditure. The object behind it is to regulate the allowance of the expenditure incurred on the guest house and unless it falls within the scope of business expenditure, there is no question of any allowance of the same. In our opinion, except those categories of persons enumerated in the judgment of this Court in Aruna Sugars Ltd. case (supra), if the accommodation is maintained for other persons, the accommodation should be regarded as guest house. In our opinion, except those categories of persons enumerated in the judgment of this Court in Aruna Sugars Ltd. case (supra), if the accommodation is maintained for other persons, the accommodation should be regarded as guest house. The decision of this Court in Aruna Sugars Ltd. case (supra) also makes it clear that it is the duty of the assessee to produce the register maintained under r. 6C of the IT Rules before the ITO to show who were enjoying the facilities afforded in the guest house. The assessee, on the facts of the case, has not produced such a register and on the basis of the decision of this Court in Aruna Sugars Ltd. (supra), the assessee's case must necessarily to fail. 13. Our conclusion is supported by the subsequent legislative amendment inserting sub-s. (5) of s. 37 of the Act by the Finance Act, 1983. 14. Accordingly, we answer the common question of law insofar as it relates to the issue whether the circuit house of the assessee is a guest house or not in the negative, in favour of the Revenue and against the assessee. The parties are directed to bear their own costs.