Business deduction for payment to former director disallowed absent contractual duty, settled practice, or business necessity.

Payment to a former director was not shown to be expenditure laid out wholly and exclusively for business purposes where the company had already resolved to go into voluntary liquidation, the recipient had long ceased to control the business, and no contractual obligation, settled practice, or business necessity was proved. The claim was examined under section 10(2)(xv) of the Indian Income-tax Act, 1922, and the facts did not justify treatment as bonus or commission under section 10(2)(x). The expenditure was therefore not allowable as a business deduction, and the conclusion was against the assessee.

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Issues: Whether the payment of Rs. 10,000 to a former director was an allowable deduction as expenditure laid out wholly and exclusively for the purposes of the business.

Analysis: The payment was made after the company had resolved to go into voluntary liquidation, the recipient had ceased to be in charge of the business long before, and the allowance was not shown to rest on any contractual obligation, established practice, or other business necessity. The claim was considered only under Section 10(2)(xv) of the Indian Income-tax Act, 1922, since the material facts did not support treatment of the amount as bonus or commission under Section 10(2)(x). On the facts found, the expenditure was not shown to have been incurred for the business and the Tribunal's conclusion was supported by the materials before it.

Conclusion: The payment was not proved to be an allowable business expenditure under Section 10(2)(xv) of the Indian Income-tax Act, 1922 and the answer was against the assessee.

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