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Sweet query


(Guest)

Hi. A company incurred expenses for Diwali like giving sweets to Bank Officials, Customers,etc.

will this be treated as Business Promotion or Gifts.....? In case of Gifts, FBT value will be 50%. Otherwise 20%.


 27 Replies

RAMANJU (here to updating the knowledge)   (485 Points)
Replied 24 June 2009

It is Business promotion expenditure not gift.

RAMANJU (here to updating the knowledge)   (485 Points)
Replied 24 June 2009

Gift means it will be possessed with you for sometime.

(Guest)

Can u tell me why?

CA. Dashrath Maheshwari (TaXpert) (15065 Points)
Replied 24 June 2009

Please go through the Judgement with reference to :

[1983] 142 ITR 509 (ALL.)HIGH COURT OF ALLAHABAD

Brijraman Das & Sons v. Commissioner of Income-tax

H.N. SETH AND V.K. KHANNA, JJ.

IT REFERENCE NO. 151 OF 1975, JULY 20, 1982

in relation to disallowance of Diwali Exp.

1 Like

CA. Dashrath Maheshwari (TaXpert) (15065 Points)
Replied 24 June 2009

You can also note that : Expenses incurred on the occasion of Dewali and mahurat are in the nature of business expenditure. Letter : F. No. 13A/20/68-IT(A-II), dated 3-10-1968.

CA Jimmit D Mehta (Employed) (494 Points)
Replied 24 June 2009

i think it will be treated as gifts as per mine knowledge......................


(Guest)

Its depends upon the custom of companies.

If sweet distribution is of regular nature on festival Fringe benefit will be 20%.

But remember in first instance sweet distribution is not treated as gift.

Sweet distribution  On any festival  is a tradition followed by almost all over in India therefore it will not be treated as Gift.

1 Like

(Guest)

Here they have distributed especially for Diwali.. If it had not been Diwali they are not going to give....

can it be taken as Festival Celebrations for FBT?

CA Amit Pandya (CA, M.com) (419 Points)
Replied 24 June 2009

 Hey think about client, always try to save client.

So, presently treat as sales promotion, will see what happens at the time of assessment.

You can go through the Judgement to know the fact

with reference to :

[1983] 142 ITR 509 (ALL.)HIGH COURT OF ALLAHABAD

Brijraman Das & Sons v. Commissioner of Income-tax

H.N. SETH AND V.K. KHANNA, JJ.

IT REFERENCE NO. 151 OF 1975JULY 20, 1982

in relation to disallowance of Diwali Exp.

CA.Sangam Aggarwal (Professional) (520 Points)
Replied 25 June 2009

it should be part of business promotion.

MOHIT (XYZ) (67 Points)
Replied 25 June 2009

Hi Mr Dashrath,

The link Letter : F. No. 13A/20/68-IT(A-II), dated 3-10-1968. contains a very bulky file. Could you please highlight as to where it's stipulated that Expenditure on Dewali Gifts should be treated as Business Promotion Expenditure instead of Gifts or Festival Celebrations?

 

Regards

Mohit

CA. Dashrath Maheshwari (TaXpert) (15065 Points)
Replied 25 June 2009

Originally posted by :MOHIT
" Hi Mr Dashrath,
The link Letter : F. No. 13A/20/68-IT(A-II), dated 3-10-1968. contains a very bulky file. Could you please highlight as to where it's stipulated that Expenditure on Dewali Gifts should be treated as Business Promotion Expenditure instead of Gifts or Festival Celebrations?
 
Regards
Mohit
"

Hi Mohit, and all other friends,

I know that the above link contains a huge descripttions and clarification of various items, I thought you will be able to find out by pressing CTRL+F (Believe me its very easy to find anything on any webpage by FIND Command).

Although I'm putting the relevant lines herewith:

338. Customary payments on Dewali/ mahurat - Whether permissible deduction - Monetary limits for their allowance withdrawn

I am directed to say that Circular No. 17 [F. No. 27(2)-IT/43], dated 6-5-1943 [Annex], referred to by you has long since been withdrawn.

As the expenses incurred on the occasion of Dewali and mahurat are in the nature of business expenditure, it has been decided not to lay down any monetary limits for the purpose of their allowance in the income-tax assessments subject to the Income-tax Officer being satisfied that the expenses are admissible as a deduction under the law and are not expenses of a personal, social or religious nature.

Letter : 13A/20/68-IT(A-II), dated 3-10-1968.

ANNEX - CIRCULAR, DATED 6-5-1943 REFERRED TO IN CLARIfiCATION

It has been repesented to the Board that customary payments in respect of Deepawali (or Dewali) and mahurat (i.e., the auspicious day of starting new accounts) which long usage and custom have made it obligatory for a business to incur, should be allowed as a deduction in computing the income under sections 10 and 12 of the 1922 Act. The Board understand that such expenses are generally of the nature of advertisement with a view to the securing of new business and that though varying according to the nature and extent of the business, the maximum expenditure is about Rs. 200 on Deepawali or muhurat. The Board consider that since these expenses are not of a personal, social or religious nature but are expended wholly and exclusively for the purposes of the business, they should be allowed as business expenditure provided that the expenditure in question does not exceed the maximum amount specified above.

(Guest)

hey.... I hav no doubt whether the Diwali expenses are allowed or not. It is definitely allowed.

My doubt is whether it should be taken for FBT as Business Promotion or Gifts or festival celbrations....

anurag (none) (38 Points)
Replied 25 June 2009

as per my knowledge it would be treated as festival celebration.


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