Business expenditure on executive salary increases must rest on evidence; unsupported disallowance of remuneration was not sustained.

Salary increases paid to executive officers are deductible as business expenditure only if the assessee shows they were laid out wholly and exclusively for business purposes. The Tribunal could disallow the claim where material supported a non-business motive, but here the record contained no finding backed by evidence that the enhanced remuneration was not business-related. The officers' relationship with a director, the doubling of salaries within two years, and the lack of a corresponding profit increase were insufficient on their own to justify disallowance, and the partial allowance of a fixed amount was also unsupported by reasons or material. The HC therefore held that the disallowance could not be sustained under section 10(2)(xv).

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Issues: Whether the Tribunal acted without evidence in disallowing part of the increase in the remuneration paid to the assessee's three executive officers as an iness deduction under section 10(2)(xv).

Analysis: The allowance of a salary increase as a business expenditure depends on whether the assessee has material to show that the payment was laid out wholly and exclusively for business purposes. The Tribunal was entitled to disallow the claim if there was evidence supporting the conclusion that the increase was for considerations other than business. However, the record disclosed no finding, supported by material, that the increased salaries were not business-related. The circumstances relied upon, namely relationship of the officers with a director, the doubling of salaries within two years, and the absence of a corresponding increase in profits, were held insufficient by themselves to sustain the disallowance. The Tribunal's partial allowance of Rs. 3,000 per year was also unsupported by reasons or material.

Conclusion: The Tribunal acted without evidence in disallowing part of the increased salaries, and the disallowance could not be sustained under section 10(2)(xv).

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