Business expenditure deduction upheld where employee remuneration-related payment was for business purposes and not unlawful

Expenditure incurred for employee remuneration and related reimbursement was deductible as business expenditure because it was found to have been spent for the assessee's business and was not an unlawful outlay. The fact that the payment arose in a statutory setting, or that the managed company had earlier been unable to secure sanction, did not by itself make the assessee's payment non-deductible. The deduction was therefore upheld on ordinary business principles.

---

---

Issues: Whether the sum of Rs. 20,482 paid by the assessee in relation to the employee's remuneration and related reimbursement was allowable as business expenditure.

Analysis: The appointment made by the assessee was treated as valid under the Companies Act, and the payment to the managed company was held not to be an illegal outlay. The earlier inability of the managed company to secure sanction did not make the assessee's payment unlawful, and the revenue did not displace the Tribunal's finding that the amount was spent for the purposes of the assessee's business. The expenditure was therefore assessed on ordinary business principles and was not disallowed merely because it arose in a statutory setting.

Conclusion: The amount of Rs. 20,482 was allowable as business expenditure and the answer was in favour of the assessee.

Final Conclusion: The reference was answered affirmatively in favour of the assessee, upholding the deduction claimed.

Ratio Decidendi: An expenditure is deductible as business expenditure if it is incurred for the purpose of the assessee's business and is not rendered non-deductible merely because it arises in connection with a statutory payment or adjustment that is not itself unlawful in relation to the assessee.

---