Commercial expediency is required for widow payments to qualify as business deductions under income-tax law.

Payments made to a managing director's widow under a service agreement were held not deductible as business expenditure because the assessee failed to show commercial expediency or that the sums were incurred wholly and exclusively for business purposes. The agreement itself was insufficient; the widow had rendered no services, the managing director had no comparable post-term benefit, and there was no material showing that the business would have suffered if the payments were not made. The amounts were therefore not allowable deductions under section 10(2)(xv) of the Indian Income-tax Act, 1922, or section 37 of the Income-tax Act, 1961.

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Issues: Whether the payments made to the widow of the managing director under the service agreement, described as pension and related sums, were allowable as deductions as expenditure laid out wholly and exclusively for the purposes of business under the relevant income-tax provisions.

Analysis: The agreement provided for payments to the widow only on the death of the managing director during the currency of the agreement, and there was no evidence apart from the agreement itself to show that the arrangement was dictated by commercial expediency. The test for allowance required proof that the expenditure was incurred solely to further the business interest of the assessee and not for any other consideration. The Court found that the managing director himself was not to receive any comparable post-term benefit, that the widow had rendered no services to the company, and that there was no material to show that the business would have been adversely affected if the payment had not been made. On these facts, the payment could not be treated as expenditure incurred wholly and exclusively for business purposes.

Conclusion: The payments to the widow were not allowable deductions either under section 10(2)(xv) of the Indian Income-tax Act, 1922, or under section 37 of the Income-tax Act, 1961, and the answer to the reference was in the negative.

Ratio Decidendi: A payment to a widow under a service agreement is deductible only if the assessee proves that it was incurred on grounds of commercial expediency and wholly and exclusively for business purposes; a contractual obligation alone does not establish deductibility where the payment serves no demonstrated business interest.

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