Employee commission deduction turns on commercial expediency and reasonableness under the employee bonus rule.

A genuine commission paid to an employee as part of remuneration, and not merely salary, is tested under the special provision governing employee bonus or commission. Allowability depends on whether the payment is reasonable in light of the employee's pay and service conditions, the business profits for the year, and comparable practice in similar businesses. Reasonableness must be judged from the standpoint of commercial expediency and a prudent businessman, taking all relevant circumstances into account. Applying that approach, the employee's importance to the business and the need to retain his services supported the deduction, and the partial disallowance was not justified.

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Issues: Whether the commission paid to an employee was deductible in computing business profits, and whether disallowance of part of the commission was justified under the governing provision for bonus or commission paid to employees.

Analysis: The commission was paid under a genuine agreement as part of the employee's remuneration over and above salary. Where such payment falls within the special provision dealing with bonus or commission to employees, its allowability depends on whether the amount is reasonable having regard to the employee's pay and conditions of service, the business profits for the year, and the general practice in similar businesses. Reasonableness is to be judged from the standpoint of commercial expediency and a prudent businessman, not by a purely subjective view of the revenue authorities. The record showed that the employee was indispensable to the business, that the arrangement was made to retain his services in the interests of the business, and that the Tribunal ignored material circumstances relevant to commercial expediency while focusing narrowly on the similarity of the employee's work before and after the agreement.

Conclusion: The full commission was allowable as a business deduction, and the disallowance of Rs. 8,167 was not justified in law.

Ratio Decidendi: A genuine commission paid to an employee as part of remuneration, and not as part of salary, must be tested under the special provision for employee bonus or commission, and its reasonableness must be assessed on the basis of commercial expediency from the standpoint of a prudent businessman considering all relevant circumstances.

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