It is not essential that the expenditure in question should have been incurred under contract. It is sufficient that the expenditure is incurred as a matter of commercial expediency and to facilitate the carrying on of the business as explained in B2.3071. A variety of examples of this may be cited. A gratuity paid voluntarily to a retiring employee has been held to be deductible on the ground that the employee expected to receive a gratuity on retirement and, therefore, was likely to serve for a somewhat smaller salary than would otherwise be payable2. Where a business was sold and the vendor failed to pay debts for which he was responsible,
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