Baksheesh, Saab!! no whispering now, its official!!

Last updated: 04 October 2007

HC: Baksheesh is official spend Shibu Thomas | TNN Mumbai: "Saab, baksheesh.'' The Persian word for tip used by everyone from the MTNL linesman to the postman at Diwali has now been accorded legal sanctity. In an important judgment that will doubtless gladden the hearts of the baksheesh giver as well as the receiver, a division bench comprising Justice F I Rebello and Justice J P Devadhar recently held that baksheesh is a valid business expense and can be shown as such in income tax returns. "The finding of the Income Tax Tribunal that baksheesh is a necessary incidence of the assessee's business cannot be faulted,'' ruled the division bench, upholding payments to the tune of Rs Rs 2.73 lakh doled out as baksheesh by a Jalnabased sugar factory to labourers and entered into the books as a business expenditure. The high court dismissed the appeal filed by the Commissioner of Income Tax challenging the finding of the tribunal. Before you start looking for the baksheesh column in the income tax form or demanding vouchers from your maid, legal experts caution that this judgment may apply to large businesses but not to individuals. A `gift' from Persian The word `baksheesh' owes its origin to the Persian word for gift. It made it to the English language in the middle of the 15th century, according to the Oxford English Dictionary. Wikipedia says that baksheesh is a term used to describe tipping, charitable giving and certain forms of political corruption and bribery in the Middle East and South Asia. The word travelled to Europe and is used in Serbia and Bulgaria to mean tip, while in Greece, it also means gift. Baksheesh an incentive for labourers High court Mumbai: The Bombay high court has ruled that baksheesh is a valid business expense. It gave its order in a case relating to Jalna's Samarth Sahakari Sakhar Karkhana Ltd paying Rs 2.73 lakh as baksheesh to labourers. In the Jalna case, the assessment record dates back to over a decade. The assessing officer disallowed the claim on account of baksheesh paid by the sugar factory, Samarth Sahakari Sakhar Karkhana Ltd, to labourers during the assessment year 1995-1996. The officer had also rejected the claim of the amount the company had given its contractors as advance payment. The Income Tax Appellate Tribunal in 2006, set aside both these decisions and said that they were valid business expenditure. The Commissioner of Income Tax then moved the high court. Advocate B M Chatterji, counsel for the IT department, argued that the sugar cooperative had paid the baksheesh on its "own sweet will'' and not because of any legal obligations. "Expenditure incurred arbitrarily without any contractual obligation cannot be allowed as business expenditure, '' the advocate contended. The Karkhana's counsel S N Inamdar, however, said that making an advance payment to the contractors and giving baksheesh to labourers employed by the contractor was the general practice of most sugar factories in Maharashtra. These expenses had been considered as valid expenses until now, the advocate said. The high court agreed with the view of the Karkhana that an advance was paid to ensure that the contractors supplied harvested sugar-cane promptly and efficiently and this was "in the business interest'' of the assessee. With regard to the baksheesh, the court agreed with the tribunal's finding, that to incentivise labourers to work hard during the harvest season that falls in the harsh summer months, baksheesh is paid. "The baksheesh claim made is reasonable and the said expenditure has been rightly held by the tribunal allowable as business expenditure, '' said the judges. As a last-ditch effort, the IT department argued that if the claim is allowed it may open the floodgates and other sugar factories may divert entire profits by way of baksheesh. The court rejected the contention saying such an argument had "no basis''. "Wherever it is found that the amounts paid as baksheesh are exorbitant and unreasonable or wholly unconnected to the business, then, in such cases, it will be open to the assessing officer to disallow the claim,'' said the court.

Category Income Tax Report

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Baksheesh, Saab!! no whispering now, its official!!

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