This article specifically focuses on gift expenses incurred by businesses for its clients on festive occasions and other such occasions, etc., and its treatment with respect to the allowance under the Income Tax Act , 1961 . Businesses generally offer gifts to their clients to set up long-lasting and durable relationship with them, and these serve as an expense to expand and earn income for the business which in turn lead to deduction of these expenses from the income so as to pay less tax [1] . The important principle to understand here is that the expenses that are incurred should be in the nature of business promotion and not in the nature of capital expenditure and personal expenses of the assesse. Case Laws Dealing with Such Expenses Jaikisan Agarwal vs. Assistant commissioner of Income ta x [2] In relation to determining the genuineness of gift. It is only the fact of the donor having transferred the money into the hands of donee and the availability of the funds