Business expenditure deduction turns on commercial necessity, and excessive salary to a relative can be disallowed as family motivated.

Salary and bonus paid to an employee are deductible only if laid out wholly and exclusively for business purposes, and the tax authority may examine the nexus between the payment and that purpose. On the facts, the employee was the proprietor's son, young, working under the father's directions, and supported by experienced staff, so the claimed amount was found excessive and attributable to family feeling rather than business necessity. The full salary and bonus claim was therefore disallowed, while the bonus limited to the salary actually allowed was treated as reasonable.

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Issues: Whether the assessee was entitled to deduct the full salary and bonus paid to his son as business expenditure under the Indian Income Tax Act.

Analysis: Salary and bonus paid to an employee are allowable only if the expenditure is laid out wholly and exclusively for the purpose of the business. The taxing authority is concerned with the nexus between the payment and the business purpose, not with substituting its own view of what would be the ideal remuneration. On the facts, the son was young, was acting under the father's directions, and the business had experienced staff available to assist him. The amount claimed was found excessive and prompted the inference that the payment was made out of family feeling rather than business necessity. The bonus, confined to the salary actually allowed, was treated as reasonable.

Conclusion: The full claim for salary and bonus was not allowable; the disallowance was upheld and the reference was answered against the assessee.

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