Commission-linked employment remuneration treated as salary, while interest deduction failed for lack of business-purpose borrowing.

Commission-linked remuneration under a continuing contract of employment was treated as salary because the employee worked under the employer's control, managed the branch, and the commission formed part of the recompense for services rendered; the amount was therefore not excluded from salary merely because it was described as commission. Interest on borrowed funds used to advance money for construction of house property was not deductible under the business-purpose borrowing provision because the borrowing itself was not shown to be for business use and no business nexus was established on the facts. Both issues were decided against the assessee.

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Issues: (i) Whether the remuneration payable under the employment agreement, including commission, constituted salary so as to support the disallowance; (ii) Whether interest on borrowed funds used to advance money for construction of house property could be deducted under the business-purpose borrowing provision.

Issue (i): Whether the remuneration payable under the employment agreement, including commission, constituted salary so as to support the disallowance.

Analysis: The agreement showed a continuing contract of employment with supervisory control over the employee, including responsibility for management of the branch, control over staff, and restrictions consistent with a servant's role. The commission was linked to turnover and formed part of the recompense for services rendered. On the settled principle that remuneration fixed by reference to turnover under an employment contract partakes the character of salary, the amount paid could not be excluded from salary merely because part of it was described as commission.

Conclusion: The commission-linked remuneration was treated as salary, and no question of law arose for reference on this issue, which was decided against the assessee.

Issue (ii): Whether interest on borrowed funds used to advance money for construction of house property could be deducted under the business-purpose borrowing provision.

Analysis: Deduction of interest was available only where the borrowing was for the purposes of business. The borrowed amount had been advanced to an employee for construction of house property, and the surrounding facts did not establish that the borrowing itself was for business use. The question whether the loan was taken for business was treated as factual, and on the facts found no business nexus was shown.

Conclusion: The interest deduction was not allowable, and no reference was called for on this issue, which was decided against the assessee.

Final Conclusion: The applications failed because both questions were concluded either by settled law or by factual findings not giving rise to a referable question.

Ratio Decidendi: Remuneration paid under a contract of employment, including commission measured by turnover, is salary when the employee acts under the employer's control, and interest on borrowed funds is deductible only if the borrowing is for the purposes of business.

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