Business expenditure deduction cannot be cut down merely because commission appears excessive once genuine business purpose is proved.

Commission paid to agents was deductible as business expenditure once its actual payment and exclusive business purpose were established under Section 10(2)(xv) of the Income-tax Act, 1922. The taxing authority could not reduce the deduction merely because it regarded the amount as excessive or unreasonable, since reasonableness is relevant only to test whether the payment was truly for business purposes. The disallowance was therefore unjustified and the deduction was allowable in full.

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Issues: Whether disallowance of the commission paid to agents was justified on the ground that the amount was excessive, despite the assessee claiming it as business expenditure under Section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The relevant inquiry under Section 10(2)(xv) is whether the expenditure was actually incurred and whether it was laid out wholly and exclusively for the purposes of the business. Once the reality of the payment and its business purpose are established, the taxing authority has no jurisdiction to reduce the deduction merely because it considers the amount excessive or unreasonable. The reasonableness of the expenditure is relevant only to test whether the payment was in fact made for business purposes, and not as an independent ground to curtail an otherwise genuine business outlay.

Conclusion: The disallowance on the ground of excessiveness was unjustified and the deduction was allowable in full; the question was answered in favour of the assessee.

Ratio Decidendi: Under Section 10(2)(xv) of the Income-tax Act, 1922, once expenditure is proved to have been actually incurred wholly and exclusively for the purposes of business, the tax authority cannot disallow any part of it merely because the amount appears excessive or unreasonable.

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