captioned appeal by revenue and inter connected cross objection filed by assessee may be conveniently consolidated and disposed of by common order. In departmental appeal objections raised are two-fold. Firstly, it is contended that CIT(A) had no justification in allowing bad debts of Rs. 38,184. Secondly Revenue is aggrieved of CIT(A)'s finding reducing disallowance of 'Vyopari Expenses as had been made by ITO. In respect of first objection, Smt. Archama Ranjan has contended that debts had not become bad and that in any case since amounts had not been written off as irrecoverable in accounts of assessee, disallowance made by ITO was justified and that CIT(A) had no justification in deleting disallowance. In support of her contentions reliance has been placed on decisions reported in CIT vs. Khemchand Bahadurchand (1981) 25 CTR (P&H) 359: (1982) 134 ITR 65 (P&H) and V.N. Rajan m Co. vs. CIT (1983) 142 ITR 545 (Cal). As decision regards in case of CIT vs. Jwala Prasad Tiwari (1953) 24 ITR 537 (Bom) on which reliance was placed by CIT(A), ld. Departmental Representatives submits that decision was not applicable under provisions of 1961 Act. As regards reduction granted in disallowance of Vyopari Expenses' ld. Departmental Representatives has placed reliance on Expln. 2 appended beneath provisions of s. 37(2A) which came into force with retrospective effect from 1st April, 1976. On other hand, Shri Rajesh Chopra, ld. authorised counsel of assessee respondent has taken us through paper book and contended that debts aggregating at Rs. 38,184 having become bad and irrecoverable and having been written off in accounts of assessee, there was no justification for ITO to have disallowed them. Referring to paper book submitted on behalf of assessee, ld. counsel submits that both debtors, namely, Mian Rais Ahmed and Vidhi Chand Daulat Ram had become defunct and that it was only after best possible efforts made to realise amounts had failed that assessee had written them off. According to ld. counsel mere fact that accounts of two debtors had not been squared up and that instead suspense account of bad debts had been credited did not disentitle assessee from its claim of bed debts. According to him, entries made in profit and loss account and suspense account together tantamounted to writing off of debts as bad and that, therefore, CIT(A) was justified in reversing order of ITO. In support of his contentions. ld. authorised counsel has placed reliance on decisions of Hon'ble Bombay and Gujarat High Courts respectively reported in (1953) 24 ITR 537 (Bom) (supra) and Vithal Das H. Bhoujibhai Bandanwala vs. CIT (1981) 21 CTR (Guj) 190: (1981) 130 ITR 95 (Guj). As far as finding of CIT(A) regarding 'Vyopari Expenses' is concerned, ld. Authorised counsel of assessee has supported order of authority of decision of Tribunal, Delhi Bench-A in ITA No. 3118/Del/82 decided on 7th Jan., 1984. It is case of assessee that expenditure incurred by assessee not only included food and beverages provided to employees but also included expenditure incurred on provision of human courtesy not amounting to hospitality. In support of cross objection filed by assessee, ld. authorised counsel has submitted that CIT(A) had no justification in not deleting entire disallowance of Rs. 24,021 and in restricting it to sum of Rs. 10,021. We have considered rival submissions. claim of bad debts which was disallowed by ITO consisted of two items. sum of Rs. 25,076 was written off in account of Mian Rais Ahmed. second debt amount to Rs. 13,108 was written off in account of Vidhi Chand Daulat Ram. We find it as fact from papers which had been submitted before authorities below and copies of which have been annexed in paper book that both above named parties were not in position to pay off debts owed to assessee. registered letter was sent to Mian Rais Ahmed which had been duly served upon him. Since no reply was received assessee deputed 'Gumashta' who went to make on spot enquiries of possibility of realising debt due from Mian Rais Ahmed. He contacted Mian Rais Ahmed and found that he did not have means to make his both ends meet. enquiry from neighbours of Rais Ahmed also confirmed that Main Rais Ahmed was without any means. Similarly, enquiries were made by gumashta' in respect of Vidhi Chand Daulat Ram. Here also, it was found that business carried on by above named debtor had been closed and that there were no chances of recovering money from him. In these circumstances when assessee had made best possible efforts to realise amounts from two debtors which had failed, it cannot be said that two amounts had not become bad debts. As far as compliance of provisions of s. 36(2) of Act is concerned, we would agree with representation made on side of assessee that entries made in profit and loss account and in suspense account amounted to writing off debts as irrecoverable. decisions of Hon'ble Bombay and Gujarat High Courts respectively reported in (1953) 24 ITR 537 (Bom) and (1981) 130 ITR 95 (Guj) (supra) squarely support case of assessee. In latter decision which is of Hon'ble Gujarat High Court it has been held by their Lordships that decision of Hon'ble Bombay High Court in case of CIT vs. Jwala Frasad Tewari (1953) (24 ITR 537 (Bom) would be equally applicable under 1961 Act. It has been further held by their Lordships of Gujarat High Court that if entries in respect of bad debt are posted in profit and loss account and corresponding entries are made in bad debtor reserve account, it would amount to sufficient compliance with statutory requirements of s. 36(2)(i)(b) of Act. In these facts and circumstances, we would not be able to agree with representation made by ld. Departmental Representatives. According to us, claim of bad debt amounting to Rs. 38,134 had been rightly allowed by CIT(A) and findings given by him in that regard need no interference. Ground No. 1 in Departmental appeal shall, therefore, fail. So far as finding of CIT(A) regarding 'Vyopari Expenses' is concerned, we would not be able to accept it as correct finding in view of provisions of Expln. 2 of s. 37(2A). Subject to financial limits prescribed in s. 37(2A), Expln. 2 forbids allowance of any entertainment expenditure on provision of hospitality of every kind whether by way of provision of food or beverages or in any other manner whatsoever unless expenditure is incurred by assessee on its employees in office, factory or other place of their work. In present case, assessee had been specifically asked by ITO to establish that any part of expenditure of Rs. 24,021 had been incurred on providing tea and food, etc. to its employees. No evidence had been furnished by assessee before ITO in support of its contention. On contrary, ITO found that expenditure by way of provision of food and beverages to employees stood debited to another account named 'staff welfare'. In these circumstances no part of expenditure of Rs. 24,021 could be said to be related to employees. Besides, we are also unable to agree with CIT(A) that expenditure on extending of human courtesy would not amount to hospitality or entertainment. language of provision of Expln. 2 is comprehensive and it includes within its ambit all kinds of hospitality whether it is lavish or frugal or whether it is necessitated by any contract or usage of trade or is extended just by way of courtesy towards constituents. decision of Tribunal in ITA No. 3118/Del/82 has not been accepted and followed in judgements given by various Benches of Tribunal at Delhi. In these facts and circumstances' we would hold that leaving apart statutory deduction of Rs. 5,000 as provided under s. 37(2A)(i), no part of 'Vyopari Expenses' was allowable as deduction. We would accordingly allow second ground in departmental appeal and dismiss assessee's cross objection. In conclusion, while appeal filed by Revenue is allowed in part, cross objection filed by assessee fails and is hereby dismissed. *** INCOME TAX OFFICER v. HARI CHAND JAIRAM SHAH