Expenses to celebrate Diwali with staff creates a goodwill and, therefore amounts to expenses incurred for the purpose of business – ITAT
In a recent judgment, ITAT has held that expenses incurred by the assessee to celebrate Diwali at his business premises along with staff members, definitely creates a goodwill for his employees as well as his customers and, therefore, the said expenses are considered to be for the purpose of business.
ABCAUS Case Law Citation:
5256 (2026) (10) abacus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) / National Faceless Appeal Centre (NFAC) dismissing assessee’s appeal.
The assessee filed his return of income which was selected for scrutiny assessment under CASS for one of the reasons being “Diwali Expenses”.
The AO disallowed the said expenses on the ground that the assessee failed to substantiate the nature of the expenses with evidence to show as to how it was his business expenditure.
The Tribunal observed that the assessee was in the business of liquor. It was not the case of the AO that the Diwali expenses debited in the accounts had not been actually incurred at the business premises of the assessee.
The Tribunal opined that the expenses being nominal amount and incurred by the assessee to celebrate Diwali at his business premises along with staff members, definitely creates a goodwill for his employees as well as his customers and, therefore, the said expenses are considered to be for the purpose of business.
Therefore, the Tribunal held that addition was not justified. Hence, the addition was deleted.
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