Business deduction for commission cannot be split without proof of non-business purpose or excessiveness in a genuine commercial arrangement.

A genuine selling agency arrangement supported full deduction of commission as business expenditure where the payment was undisputed, the agent assumed contractual responsibilities and risk, and there was no finding that any part was paid for extra-commercial consideration or was excessive. The governing test was whether the expenditure was laid out wholly and exclusively for business purposes from the businessman's point of view. In the absence of proof identifying any non-business element, the commission could not be apportioned and partly disallowed; the entire amount was therefore allowable as a business deduction.

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Issues: Whether the entire selling agency commission paid under the agreement was allowable as a business deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922, or whether only a part of it could be allowed by apportionment.

Analysis: The agreement was found to be genuine and the commission payment undisputed. The Tribunal recorded that the selling agent had undertaken contractual responsibilities, including responsibility for payment and risk under the agreement, and there was no specific finding that any part of the commission had been paid for extra-commercial consideration or that the amount was excessive. In such circumstances, the governing test was whether the expenditure was laid out wholly and exclusively for the purposes of the business judged from the businessman's point of view. The absence of proof that the payment lacked business purpose or that any identifiable part was non-deductible left no basis for apportioning the commission.

Conclusion: The entire commission was allowable as a business deduction, and the question referred had to be answered in the negative, in favour of the assessee.

Ratio Decidendi: Where commission paid under a genuine commercial arrangement is found to have been incurred for business purposes and no part is shown to be attributable to extra-commercial consideration or excessiveness, the expenditure cannot be split and disallowed in part merely on conjecture.

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