Business support payment treated as capital expenditure where it protected reputation and was not solely incurred to earn income.

Expenditure made to support a company was held not deductible because it was not incurred solely for earning income from any single source and was also directed to preserving and enhancing the assessee's business reputation, which was treated as a capital asset. Deduction under Section 12 was unavailable because the outgoing was not confined to earning the relevant income, and Section 10(2)(ix) was also inapplicable because the payment was not incurred solely for earning business profits or gains. Section 7 did not apply. The amount was therefore treated as capital expenditure and disallowed.

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Issues: Whether the amount paid by the assessee to support the company was deductible as expenditure under the business head or under other sources, or whether it was capital expenditure not allowable as a deduction.

Analysis: The payment was made to protect the company's continued existence, the assessee's salary and dividend income, and his business reputation as a promoter and businessman. Expenditure under Section 12 could be allowed only if incurred solely for the purpose of making or earning the relevant income, and expenditure under Section 10(2)(ix) had to be incurred solely for earning business profits or gains. The payment was not confined to any one source of income and was also directed to preserving and enhancing the assessee's reputation, which was treated as a capital asset. Section 7 was inapplicable.

Conclusion: The payment was not deductible under Sections 7, 10(2)(ix), or 12 of the Income-tax Act, 1922, and was rightly treated as capital expenditure, against the assessee.

Ratio Decidendi: An outgoing is not deductible where it is not incurred solely for earning the relevant income and is made to protect or enhance business reputation or other enduring capital interests.

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