Permissible business expenditure: tax authorities cannot reduce quantum by applying a separate reasonableness test once purpose is accepted.

Whether a taxing authority may, after accepting an expenditure was incurred solely for earning profits under section 10(2)(ix), apply its own reasonableness standard to refix quantum: the court explains that the authority may inquire into bona fides, surrounding circumstances and quantum only insofar as these bear on the question of purpose, but absent express statutory words conferring power to limit or determine permissible quantum by a separate reasonableness test the authority lacks jurisdiction to reduce an amount already accepted as a permissible business expenditure; outcome: authority cannot refix or reduce such quantum.

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Issues: Whether, after accepting that an item of expenditure is incurred "solely for the purpose of earning profits or gains" within section 10(2)(ix) of the Burma Income-tax Act, the Income-tax authorities are entitled to apply their own standard of reasonableness to refix the quantum of that expenditure.

Analysis: Section 10(2)(ix) permits deduction of expenditure incurred solely for the purpose of earning profits or gains. The taxing authority may, at the stage of deciding whether an item falls within that provision, inquire into bona fides, surrounding circumstances and the quantum insofar as those matters bear on whether the expenditure was incurred solely for business purposes. Absent express statutory language empowering the taxing authority to determine or limit permissible quantum by applying a separate subjective reasonableness test, the authority has no jurisdiction to reduce or refix an amount already accepted as a permissible business expenditure on the basis that it is "unreasonably" high. Canon of construction applicable to taxation requires clear words to confer such power on the taxing authority; no such words appear in clause (ix) unlike in other provisions where reasonableness is explicitly provided for.

Conclusion: The Income-tax authorities are not entitled, once an expenditure has been accepted as incurred solely for business under section 10(2)(ix) of the Burma Income-tax Act, to refix or reduce its quantum by applying their own standard of reasonableness. The question is answered in the negative and the reference is allowed in favour of the assessee.

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