In the case of an exporter firm ( Maharani of india) reported at(2022) 94ITR(Trib) (S.N) 8 the A.O made some disallowance out of entertainment expenses incurred at clubs alleging them as personal in nature.
The Tribunal even while admitting that the assessee’s entire business is export of garments out of India and many of the foreign buyers came India in connection with export business activities and the assessee firm have to look after the foreign buyers and soliciting them however declined to grant deduction for expenses on account of purchase of cigarettes, wines etc., as business expenses.
The following mention by ITAT is worth noting:
“The A.O. noted that the expenses with regard to entertainment are related to purchase of foods items and some of the bills are in the names of the partners for Delhi Gold club. In this regard, we are of the view that assessee’s business is export of garments out of India and many of the foreign buyers came India in connection with export business activities and the assessee firm have to look after the foreign buyers and soliciting them, but at the same time, we cannot lost sight of the fact that some of the expenses claimed by the assessee are on account of purchase of cigarettes, wines etc., in our view, these expenses incurred by the assessee on purchase of cigarettes, wines etc. cannot be allowed as business expenses”
The bench and the revenue lost sight of settled law vide Hero Cycles reported in  379 ITR 347 (SC) by which once it is established that there is nexus between expenditure and purpose of business Revenue cannot justifiably claim to put itself in arm- chair of businessman or in position of board of directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case.
Section 37 is a beneficial provision to enable a taxpayer to present claims that are undefined in sections 30-36 but more often understood and vigorously used as a disallowance section by the assessment machinery.