Business deduction denied for payment to founder director's widow where no contractual liability or commercial expediency was shown.

A payment to the widow of a founder director was held not to qualify as a business deduction because it was not incurred wholly and exclusively for business purposes. The company had no contractual obligation to the widow, the payment was not made on ordinary service terms, and she rendered no service to the company. It was also not treated as contractual liability, deferred remuneration, or a pension supported by commercial expediency. The outgoing was therefore regarded as influenced by extraneous considerations and disallowed as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922.

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Issues: Whether the amount paid to the widow of a founder director was allowable as a business deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The payment was not made to the company's employee on ordinary service terms, nor was the company a party to any contractual obligation with the widow. The arrangement was part of an internal reorganisation of management by persons controlling the company, and the widow rendered no service to the company. The payment could not be treated as contractual liability, deferred remuneration, or as a pension justified by commercial expediency. For such an outgoing to be deductible, it must be incurred wholly and exclusively for business purposes and without extraneous considerations. The facts did not satisfy that test.

Conclusion: The amount was not an allowable deduction and the question was answered in the negative, against the assessee.

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