Business expenditure for jubilee mementos to shareholders and directors was allowed due to clear business nexus.

Expenditure on silver medals and plaques given to shareholders and directors at a company's silver jubilee was treated as allowable business expenditure under section 37 of the Income-tax Act, 1961. The recognition of shareholders' contribution to the company's prosperity and directors' role in business management established the required business nexus. The small value of the mementos supported the conclusion that the outlay was incurred wholly and exclusively for business purposes, so the expenditure was allowed as a business deduction.

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Issues: Whether expenditure incurred on silver medals and plaques presented to shareholders and directors on the occasion of the company's silver jubilee was allowable as business expenditure under section 37 of the Income-tax Act, 1961.

Analysis: The expenditure was incurred in recognition of the shareholders' long-standing contribution to the company's prosperity and the directors' role in the conduct of business. The small value of each memento and the business nexus of the recipients were treated as sufficient to maintain the connection between the expenditure and the assessee's business. The expenditure was held to have been incurred wholly and exclusively for business purposes.

Conclusion: The expenditure was allowable as business expenditure and the answer to the referred question was in favour of the assessee.

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