Tax consultant's fee for settling concealed income was not deductible as business expenditure under the 1922 Income-tax Act.

Fees paid to an income-tax consultant for preparing statements, dealing with revenue authorities and settling concealed income and tax liability were held not to be expenditure laid out wholly and exclusively for business under section 10(2)(xv) of the Indian Income-tax Act, 1922. Expenses directed to ascertainment or discharge of tax liability, or incurred to reduce the consequences of concealment and avoid penal exposure, were treated as relating to tax compliance rather than the carrying on of trade. The court therefore held that the consultant's fee was not deductible, and the issue was decided against the assessee.

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Issues: Whether fees paid to an income-tax consultant for settling concealed income and tax liability were deductible as expenditure laid out wholly and exclusively for the purposes of business under the Income-tax Act, 1922.

Analysis: The allowance under section 10(2)(xv) was confined to expenditure incurred wholly and exclusively for carrying on the business and earning its profits. Expenses incurred for preparing statements, dealing with the revenue authorities, or settling tax liability were directed to the ascertainment and discharge of tax liability, not to the carrying on of the trade. Where the expenditure arose from concealment of income and was incurred to escape or reduce the consequences of that concealment, it was not commercial expenditure connected with business operations. The departmental practice of allowing consultant's fees could not create a deduction where the statute did not permit it.

Conclusion: The payment was not deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922, and the question was answered against the assessee.

Ratio Decidendi: Expenditure incurred to ascertain, settle, or reduce tax liability, especially where connected with concealed income and avoidance of penal consequences, is not expenditure laid out wholly and exclusively for the purposes of business and is not deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922.

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