Burden of proof in business expenditure deductions upheld where salary increases lacked commercial justification and supporting material.

A deduction claim under Section 10(2)(xv) was treated as a claim in the nature of exemption, so the assessee bore the burden of proving that the salary expenditure was laid out wholly and exclusively for business purposes. The Tribunal relied on surrounding circumstances, including no special justification for the increase, no additional duties, an incorrect explanation, and no demand for higher salaries, to conclude that the enhanced payments were not business expenditure. The finding was held to be supported by material on record, and the issue was answered in favour of the Revenue.

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Issues: Whether there was material to support the Tribunal's finding that part of the salaries paid to the assessee's employees was not expenditure laid out wholly and exclusively for the purposes of business under Section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: A claim for deduction under Section 10(2)(xv) being in the nature of a claim for exemption, the burden lay on the assessee to prove the facts necessary to establish that the expenditure was incurred wholly and exclusively for business purposes. The Tribunal drew its conclusion from the surrounding circumstances, including the absence of any special justification for the increase, the absence of additional duties, the incorrectness of the explanation offered, and the fact that no demand for higher salaries had been made. On that material, the Tribunal held that the enhanced salaries were not justified by business considerations.

Conclusion: The finding of the Tribunal was supported by material on record and the question was answered in the affirmative, in favour of the Revenue.

Ratio Decidendi: In a claim for deduction under Section 10(2)(xv), the assessee bears the burden of proving that the expenditure was wholly and exclusively for business purposes, and a Tribunal's finding on that issue will stand if it is supported by material on record.

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