Commercial expediency supports business deduction for a widow's pension paid to maintain employee confidence and loyalty.

Expenditure voluntarily incurred on grounds of commercial expediency may qualify as being laid out wholly and exclusively for business under section 10(2)(xv) of the Indian Income-tax Act, 1922, even where a third party benefits. Applied to a payment made to the widow of an employee murdered in the course of duty, the principle supports deductibility where the payment is intended to maintain employee confidence, loyalty, and incentive in risky work. On the stated facts, the widow's pension was treated as allowable business expenditure, while the related passage money, wreath expenditure, and grave repair items were not treated as deductible on the same basis.

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Issues: Whether the pension paid to the widow of an employee murdered in the course of duty was expenditure laid out wholly and exclusively for the purpose of the assessee's business under section 10(2)(xv) of the Indian Income-tax Act, 1922, and whether the related passage and funeral-related items were also allowable.

Analysis: The governing test under section 10(2)(xv) is whether the expenditure was incurred wholly and exclusively for the purpose of business, and that expression includes expenditure incurred voluntarily on grounds of commercial expediency to facilitate the carrying on of the business. A payment may be deductible even if a third party benefits, if a prudent businessman could regard it as promoting the business interest. On the facts, the pension paid to the widow of the murdered employee could reasonably be treated as a commercial act intended to maintain employee confidence, loyalty, and incentive in work involving risk. The court, however, accepted that the passage money, wreath expenditure, and grave repair expenses were not being claimed as deductible business expenditure in the same manner.

Conclusion: The pension payments were allowable as business expenditure under section 10(2)(xv), but the related passage, wreath, and grave expenses were not. The reference was therefore answered partly in favour of the assessee.

Ratio Decidendi: Expenditure voluntarily incurred on grounds of commercial expediency to foster employee loyalty and confidence in the business may be treated as having been laid out wholly and exclusively for the purpose of business, even where it benefits a third party.

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