Section 37(1) of the Income-tax Act, 1961—Business expenditure— Ex gratia payment made by the employer to its employees is on account of commercial expediency and hence allowable.

Facts: Whether Tribunal was not justified in allowing ex gratia payment as a deductible expense. The ex gratia payment by its very nature of payment is a favour having no nexus with commercial consideration?

Held, that section 63 of the Multi State Co-operative Societies Act, 2002 empowers the Board of Directors to approve payment of ex gratia amount to its employees. It is also observed by the Tribunal that the assessee has been extending incentives to employees for the preceding years and the subsequent years also and the same is accepted by the Revenue. Ex gratia payment made by the employer to its employees is on account of commercial expediency and hence allowable. - CIT V/s NEW INDIA CO. OP. BANK LTD. - [2018] 2 ITCD Online 126 (BOM)