Ex gratia payments for employee performance are business expenses u/s 37, not Section 36(1)(ii) of Income Tax.

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....Good work reward - it was an ex gratia payment or some sort of reward given to an employee for the good work done by him and would therefore, fall within the category of expenditure incurred for the purpose of business expediency and for improving the working of the assessee. - it would not fall u/s 36(1)(ii) but would fall u/s 37 - AT....