Commercial expenditure under a bona fide selling agency arrangement remains deductible when supported by real business consideration.

Additional price of sugarcane was not treated as an accrued liability for deduction in the relevant assessment year, following the Court's earlier view on the same assessee and issue. Commission and brokerage paid under a selling agency arrangement were treated as allowable business expenditure because the arrangement had commercial substance, including deposit obligations, office maintenance requirements and an ongoing contractual framework. The control regime did not by itself negate the business character of the payments, and the brokerage to the associate was regarded as ancillary to the main agency arrangement. The claimed deductions were therefore allowed on the footing that the expenditure was incurred wholly and exclusively for business purposes.

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Issues: (i) Whether liability for additional price of sugarcane accrued during the previous year and was allowable as a deduction for the assessment year 1961-62. (ii) Whether commission and brokerage paid under the selling agency arrangements were allowable as business expenditure.

Issue (i): Whether liability for additional price of sugarcane accrued during the previous year and was allowable as a deduction for the assessment year 1961-62.

Analysis: The issue was covered by an earlier decision of the Court on the same assessee and the same question. Following that decision, the accrual and deductibility of the additional price claim was negatived on the reasoning already accepted in the earlier reference.

Conclusion: The issue was answered in the negative and in favour of the assessee.

Issue (ii): Whether commission and brokerage paid under the selling agency arrangements were allowable as business expenditure.

Analysis: The commission agreement was supported by commercial consideration, including the deposit made by the agent, the obligation to maintain an office, and the continuing contractual arrangement. The control regime did not render the agreement void or the expenditure non-business in character. The brokerage payment to the associate was ancillary to the main selling agency arrangement and stood on the same footing as the commission payment.

Conclusion: The expenditure was allowable as having been incurred wholly and exclusively for the purpose of the assessee's business, and the issue was answered in the negative and in favour of the assessee.

Final Conclusion: The reference was disposed of by holding both referred questions in favour of the assessee, resulting in allowance of the claimed deductions.

Ratio Decidendi: Expenditure incurred under a bona fide commercial arrangement is deductible when it is supported by adequate commercial consideration and is expedient for the purpose of business, even if the immediate scope for services is restricted by regulatory control.

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