JUDGMENT By Court 1. We have heard both sides. 2. The Assessee being a Company paid certain amounts to a club intended for its employees. Half of the expenditure was disallowed under Section 37(1) of the Income Tax Act by the Assessing Officer holding that it was not verifiable whether the expenditure was expended wholly and exclusively for the purposes of business. The Assessing Officer has wrongly applied Section 40A(2) of the Income Tax Act, which has no application in this case. The C.I.T. (Appeals) allowed the expenditure but the order of the C.I.T. (Appeals) was reversed by the Income Tax Appellate Tribunal, Ranchi which upheld the order of the Assessing Officer. 3. It may be repeated here that the Assessing Officer has allowed 50% of such expenditure. 4. In the case of M/s Sassoon J. David and Co. Pvt. Ltd. v. C.I.T. reported in (1979)118 ITR 261, the Supreme Court has held that the words 'wholly and exclusively' used in Section 10(2)(xv) of the Act corresponding to the Section 37 of the Income Tax Act, 1961 did not mean "necessarily". Peferring to the history of the legislation, the Supreme Court found that the attempt to incorporate the word "necessarily" in addition to the word "wholly and exclusively' was unsuccessful. 5. According to the Supreme Court, it is primarily for the Assessee to consider whether the expenditure should or should not be made for the purposes of advancing its business interests, and it is not for the tax authorities to decide whether such expenditure was or was not necessary to advance such business interests. Obviously, this will not mean that expenditure, which by no stretch of imagination, is relatable to the business interest can also be claimed by the Assessee for being allowed under Section 37 of the Act. 6. However, in the present case factually the amount has been paid to the club meant for entertaining to the employees of the Assessee and the customers. Even if it is assumed that in addition to customers, the employees were entertaining their families and friends, yet ultimately it was the employees who were being entertained, and therefore it can reasonably be said that entertainment of the employees is a part of the business strategy. 7. We therefore, set aside the order of the Income Tax Appellate Tribunal, Ranchi and restore the order of the C.I.T. (Appeals) on the above ground. 8. 7. We therefore, set aside the order of the Income Tax Appellate Tribunal, Ranchi and restore the order of the C.I.T. (Appeals) on the above ground. 8. The second and more substantial question which arises is with regard to dis-allowance of electricity charges under Section 40A(2)(b). 9. The relevant facts are that the Appellant before us, who is the Assessee, is an associate of another Company called TISCO. The Appellant has in its campus certain residential quarters for its employees. The electricity supply was taken by TISCO from Bihar State Electricity Board in the relevant year. The rate of the electricity supply was of the industrial power, which was more expansive than the domestic power. TISCO in turn sold the said industrial power at the same rate as it was purchased by TISCO from Bihar State Electricity Board to the Assessee. The Assessee supplied that power to its employees for domestic use. The Appellant charged its employees at the domestic rate and paid the remaining part i.e. the difference between domestic rate and industrial rate from its own fund to TISCO for onward payment to Bihar State Electricity Board. 10. The question which arose for consideration was whether this payment was payment to its associate, which could be examined under Section 40A. 11. We required the learned Counsel for the Income Tax Department to examine whether the interpretation suggested by the Assessee was liable to be misused by other Assessees in other cases. No such possibility of misuse has been pointed out by the Income Tax Department. 12. Considering the purpose of the provision; which is obvious, the provision of Section 40A(2) towards payment made by the Assessee to its associate for goods procured by the associate, and supplied to the Assessee at the same rate at which goods have been procured or purchased, cannot be said to be covered under Section 40A(2). 13. We therefore held accordingly and on that ground set aside the order of the Income Tax Appellate Tribunal, Ranchi and restore the order of the C.I.T. (Appeals). 14. This appeal is accordingly, allowed.