Business expenditure for excluding competition treated as deductible revenue outlay under income-tax law

Expenditure paid under an agreement to keep a competing interest out of the assessee's business area was treated as revenue outlay, not capital or personal expenditure, because no business asset was acquired and the payment was made wholly and exclusively for business purposes. The text states that the amount was therefore deductible under Section 10(2)(xv) of the Income-tax Act, 1922.

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Issues: Whether the sum of Rs. 2,100 paid under the agreement was allowable as a deduction under Section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The payment was not made to acquire any asset of the business. It was made to keep a competing interest out of the area in which the assessee carried on business, so that the assessee could conduct its trade without competition. The expenditure was incurred in the relevant accounting year in relation to the business carried on by the assessee, was neither personal nor capital in nature, and was laid out wholly and exclusively for the purposes of the business.

Conclusion: The deduction was allowable and the question was answered in the affirmative, in favour of the assessee.

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