During Assessment the AO noted that a substantial part of the expenses booked by different units of the assessee-company related to employees’ meals on duty, medical expenses, mediclaim insurance, uniform expenses, recruitment expenses, employees’ relation expenses. According to him, recruitment expenses and employees’ relation expenses did not relate to staff welfare, nor were expenses on account of festival gift. Therefore, he disallowed certain expenditure out of the purported staff welfare expenses. The CIT (A) deleted the additions. Tribunal held that staff recruitment expenses were incurred only exclusively for the purpose of business and hence allowable expenditure. The expenses on account of employees’ relation expenses was incurred for efficient functioning of the business which pertained to employees meals on duties, medical expenses, medical insurance, uniform expenses, etc., and these expenses were incidental to carrying on the business which was crucial in the hotel industry. It was expended wholly and exclusively for the purpose of business and thus allowable under section 37(1) of the Act. (AY. 2004-05).