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Views: 1870 | 10-10-07, 05:21 PM #1
Baksheesh is official expense: HC
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MUMBAI: " Saab, baksheesh ." The Persian word for tip used by everyone from MTNL linesman to the postman has been accorded official sanctity to the tradition of baksheesh .
In an important judgment that will doubtless gladden the hearts of the baksheesh giver as well as the receiver, a division bench of 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 bench, upholding the payments to the tune of Rs 2.73 lakh paid as baksheesh by a Jalna-based sugar factory to labourers. The 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.
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 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 HC.
Advocate B M Chatterji, counsel for the I-T 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 was the general practice of most sugar factories in Maharashtra. These expenses had been considered as valid expenses until now, the advocate said.
The HC agreed with the view of the Karkhana that an advance was paid to ensure that the contractors supplied harvested sugar cane promptly 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 incentives 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 I-T department argued that if the claim is allowed other sugar factories may divert entire profits by way of baksheesh . The court rejected the contention.
"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.
Baksheesh is official expense: HC-India-The Times of India
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12-10-07, 12:05 PM #2Well Known Member
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Re: Baksheesh is official expense: HC
Hi, this an email reposted by one of member from Dwarka posted on the subjected .. Am sure this will help those confused on the verdict.
I think that we have misunderstood the decision
of Bombay High Court on Bakashish as the decision has
not legitimised the payment of bribe but only
Bakashish and that too for the purpose of deduction
allowed as an expenditure deductible under income tax
rules. There is as difference between Bakshish and
Bribe. In fact, Bakshish, gift, award, reward, prize,
alimony, will and bribe, all have different meanings.
The difference between bribe and Bakshish, to me,
is as follows:
Bakshish is a small amount paid to be serving
class. A tip to bearer and amount paid to this class
over and above the fixed consideration can be called
'Bakashish'. Its origin can be traced from the times
of Samarts Maharajas, Rajas, Kings, Mugalas and of
late, Britons who ruled India till 1947. Payment of
Bakashish depends on ones willingness to pay without
any compulsion to keep the serving class happy.
Amount paid under compulsion for some legal or
illegal work is bribe. Authorities keep pending such
work or put unwarranted objection (s) in order to
grease their palms for doing such work. The amount of
bribe can be small, say only even one cup of tea or
As per Oxford dictionary, Bribe is a sum of
money or something valuable that u give or offer 2
somebody 2 persuade them 2 help u, especially by doing
Though, the dictionary says doing something
dishonest, now a days, we have to bribe for doing
honest (legal and regular work in all respect) work
We can sought the help of our learned Advocate
Mr. Ashok Chaitainya to understand the impact and
merit and demerit of the Bombay HC decision.
Mahendra Kumar Gupta
12-10-07, 12:45 PM #3
Re: Baksheesh is official expense: HC
Please enlighten me whether following is "Baksheesh" or "Bribe":
1. My employee goes to file the monthly VAT Returns. We are on time and
we pay to the last paise, EXACTLY !
The clerk who stamps the return copy ask for "Chai Pani ka paisa".
We do not need any favour from the clerk or the department.
Is he asking for Baksheesh or Bribe ?
2. I visit the DC of Income Tax because I have been called by him
to show some documents.
While exiting the buliding, his peon follows me in the lift and says "
saheb kuch to de do". Is that Baksheesh or Bribe ?
3. My colony is part of the Secunderabad Cantonment Board.
They have contracted a private party to clean the streets.
The private contractors employees have a uniform with a blue
coloured coat with the letters "SCB - PVT." embroidered in yellow
on the back. Every alternate day, these employees ring our bell and
refuse to go away till my wife pays them Rs 10.00.
Is that Baksheesh or Bribe ?
4. The policeman on his beat stops by the vegetable vendor and the
grocer to get his daily rations and never pays for them. Is that
Baksheesh or Bribe ?
(All these are actual events, I am not dreaming them up !).
Please also tell me why Baksheesh should be a deductible expense and not a Bribe ? Especially if a Bribe is paid to get the Government Officer/Staff to do his/her regular work (for which he is in any case paid a salary).
Besides how do you recogonise "compulsion". Can I prove it only if someone holds a gun on my head ? What about "silent" compulsion.....when you are looked at with those longing eyes (which probably put even the best actress to shame).
Do you remember that till a few years ago (before private telecom operators came on the scene), a gang of BSNL staff would regularly visit your house/office before Diwali.....was that asking for Baksheesh or Bribe ? Obviously, if you did not pay, you would mysteriously see your line disconnected or go under "fault".
Oxford is Oxford, but in the Indian context there is very little to differentiate between the two.
In the particular case mentioned....why did the Accountant not term it as Bonus or Ex Gratia Payment or Performance Incentive ?
If, "an advance was paid to ensure that the contractors supplied harvested sugarcane promptly and this was in the business interest of the assessee", then most of the bribes paid in India should be Tax Deductible.