Revenue expenditure must be solely and exclusively for business; payment not proved necessary, deduction denied.

Whether a payment of Rs. 23,200 qualified as a revenue expenditure deductible under section 10(2)(xv) turned on whether it was incurred solely and exclusively for business. The HC applied the statutory test that expenditure must be revenue in nature and necessary for business; factual findings showed no genuine selling agency services, local sales by the assessee, absence of proof of necessity or working-capital need, and linkage of the arrangement to obtaining finance for a partner's obligations. On those facts the Tribunal correctly concluded the payment was not proved to be solely and exclusively for business and the claim was disallowed.

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Issues: Whether the assessee is entitled to claim Rs. 23,200 paid to Keshavlal Talakchand as a deduction under section 10(2)(xv) of the Income-tax Act, 1961.

Analysis: The issue was whether the payment was a revenue expenditure incurred wholly and exclusively for the purpose of the business. The Court applied the statutory test in section 10(2)(xv) requiring an expenditure to be of revenue nature and incurred solely for business purposes. The facts showed that no genuine selling agency services were rendered by the payee, the manufactured product was sold locally by the assessee, and material to establish necessity of the expenditure or need for working capital was not placed before the authorities. The arrangement was linked to obtaining finance and the loan was utilised in clearing obligations related to a partner of the managing agency; there was no evidence that but for the payment the assessee would have earned profits that made the payment necessary. On the available facts the Tribunal could correctly conclude that the expenditure had not been proved to be solely and exclusively for the purpose of the business.

Conclusion: The claim for Rs. 23,200 is not allowable under section 10(2)(xv) of the Income-tax Act, 1961; the question is answered in the negative and against the assessee.

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