Gift to persons who work for company is allowable as business expenditure

ACIT Vs IREO Waterfront Pvt. Ltd (ITAT Delhi)

ITAT Delhi held that expenditure towards gift to persons who work for the assessee company during Diwali occasion is held for the purpose of business as per the principle of commercial expediency and accordingly allowable as business expenditure.

Facts- The assessee incurred expenditure towards purchase of two omega watches given as gift and purchase of silver articles for Diwali gifts. AO disallowed the same as not meant for business purposes of the assessee by stating that the assessee failed to produce the details of persons along with reasons and confirmations to whom the expensive gifts were distributed.

Conclusion- It is customary to incur these expenses on various auspicious occasions especially festivals like Diwali to be given to brokers, persons who work on behalf of the assessee company, customers and suppliers of the assessee, in order to keep them in good humor. It is a fact that by incurrence of these expenditure at the proper time like Diwali occasion would certainly strengthen the relationship of the assessee with the persons who work for the assessee company, customers and suppliers which in turn would enable the company to have continued relationship with the parties. Hence we hold that the said expenditure is held for the purpose of business as per the principle of commercial expediency.

FULL TEXT OF THE ORDER OF ITAT DELHI

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