Expenses incurred for purchase of Diwali gifts by the assessee for the customers is an allowable expenditure U/S 37: ITAT
1. The AO had disallowed expenses towards purchase of Diwali gifts 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.
2. The aforesaid gifts were given by the assessee to its land aggregators who were identifying and brokering the land deals on behalf of the assessee company and to brokers who were effecting bulk sales for the assessee company, on the occasion of Diwali.
3. The assessee had stated before the ld. CIT(A) that no details were ever called for by the ld. AO regarding this expenditure and the assessee came to know of this only from the assessment order.
ITAT Delhi held as below:
1. The assessee is in the real estate business wherein purchase of land and sale of projects is the most critical and commercially important activity and hence it was very important for the assessee to keep land aggregators and brokers in good humor.
2. 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.
3. Hence we hold that the said expenditure is held for the purpose of business as per the principle of commercial expediency.
4. So the appeal of the revenue is dismissed.