If cash incentive paid to staff and agents are regarded as entertainment expenses, its tax deductibility will immediately become questionable.  That is the argument which the tax authority holds on to not allowing the said cash incentives as tax deductible.

In tax reporting, a wise businessman will not blindly follow so called expert advise but will ensure his tax benefits are not in vain in advance as to avoid unnecessary doubts raised during the tax audit.  He knows well that only himself but no one, even the tax consultant, will pay the additional tax plus relevant penalty arising from the wrong treatment of income and expense items in his tax reporting.

(On the tax deductibility of Cash Incentives, one may like to make a reference to the latest case laws, NV Alliance Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri, 2012.)