Prudent businessman test governs director remuneration excessiveness under income tax law; commercial justification defeats disallowance.

Director's remuneration and profit commission were treated as commercially justifiable where the director had technical qualification, business experience, and actual supervisory responsibility, and the appointment and terms had corporate approval. The Court approved the Tribunal's approach of testing excessiveness from the standpoint of a prudent businessman, and held that the Supreme Court's earlier observations were context-specific rather than a universal checklist. On the facts found, the payment was not excessive or unreasonable, so disallowance under section 10(4A) was not warranted.

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Issues: Whether the remuneration and profit commission paid to a director were excessive or unreasonable so as to warrant disallowance under section 10(4A) of the Indian Income-tax Act, 1922.

Analysis: The Tribunal's finding that the director possessed technical qualification, business experience, and actual responsibility in supervising expanding concerns was supported by material on record. The appointment and terms were also relevantly approved in the corporate law context. The Court held that the Tribunal had applied the correct approach by considering the matter from the standpoint of a prudent businessman and that the Supreme Court's observations in the cited precedent did not require evidence on every conceivable factor in every case; those observations were context-specific. The factual findings accepted by the Tribunal were neither irrelevant nor perverse.

Conclusion: The remuneration was not shown to be excessive or unreasonable, and no disallowance was justified. The question was answered in the negative and in favour of the assessee.

Ratio Decidendi: In determining whether remuneration paid to a director is excessive or unreasonable under section 10(4A), the decisive test is whether, on the facts of the case, the payment is commercially justifiable from the standpoint of a prudent businessman; the assessee is not required in every case to adduce evidence on every factor mentioned in earlier authority.

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