Business expenditure deduction turns on commercial expediency, and a collusive or excessive commission payment was held non-deductible.

Commission paid under an agreement was held not deductible because it was not shown to have been laid out wholly and exclusively for the business. The court emphasised that actual execution of the agreement, payment of commission, and use of borrowed funds in the business do not end the inquiry; the taxing authority may examine motive, object, commercial expediency, and whether the arrangement is a device to divert profits or confer undue benefit. On the concurrent findings that the payment was excessive, collusive, and unsupported by legitimate business need, the deduction failed and the reference was answered against the assessee.

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Issues: Whether the commission of Rs. 68,540 paid to the minors under the agreement dated September 27, 1958, was expenditure laid out wholly and exclusively for the purpose of the assessee's business and, therefore, deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The court held that actual execution of the agreement, actual payment of commission, and actual use of the borrowed funds in the business did not conclude the inquiry. The words "wholly and exclusively" empower the taxing authority to examine the motive, object, and purpose of the expenditure, and to see whether the transaction was commercially expedient or merely a device to divert profits or confer an undue benefit. Applying the settled principle that commercial expediency must be judged on the totality of circumstances, the court relied on the concurrent factual findings of the tax authorities that the payment was excessive, collusive, and not prompted by legitimate business need. The scope of interference in reference jurisdiction was limited, and the court would not disturb such findings unless they were unsupported by evidence.

Conclusion: The commission was not an admissible deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922, and the reference was answered against the assessee.

Ratio Decidendi: A payment is deductible only if, on the totality of circumstances, it is shown to be incurred wholly and exclusively for the purpose of the business; the taxing authority may disregard an arrangement that is excessive, collusive, or a colourable device, and concurrent findings of fact to that effect will not be interfered with in reference proceedings unless unsupported by evidence.

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