Business expenditure deduction for adviser remuneration turns on commercial expediency and proof of exclusive business purpose.

Deductibility of remuneration to a technical adviser under section 10(2)(xv) of the Income-tax Act, 1922 depended on whether the expenditure was laid out wholly and exclusively for business purposes. The assessee bore the burden of proving commercial expediency, and reasonableness could not rest on its own assertion alone; revenue authorities were entitled to examine surrounding circumstances. On the facts, the adviser's appointment and payment were influenced by factors such as prior relationships, shareholding position, unclear selection material, lack of demonstrated special technical qualification, and the company's commercial background. The balance remuneration was therefore treated as not wholly justified as business expenditure.

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Issues: Whether the disallowance of part of the remuneration paid to the assessee-company's technical adviser was permissible under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The claim for deduction had to be tested on the facts and circumstances of the case, but the burden lay on the assessee to prove that the expenditure was laid out wholly and exclusively for the purposes of its business. Reasonableness could not be judged by a purely subjective standard or by the assessee's own ipse dixit, and the revenue authorities were required to examine the surrounding circumstances and decide the question on the basis of commercial expediency. On the facts, the appointment and remuneration of the technical adviser were influenced by several circumstances suggesting that the payment was not wholly justified as business expenditure, including the relationship with the earlier incumbent, the shareholding position, the absence of clear material regarding selection, the lack of special technical qualification in enamel goods, and the overall financial and commercial background of the company's profits and growth.

Conclusion: The disallowance of the balance remuneration was permissible. The answer to the reference was against the assessee and in favour of the revenue.

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