Genuine commission payments remain deductible where services are rendered and commercial expediency is established

Commission paid to a genuine selling agent for services actually rendered was held allowable as business expenditure, because allowance depends on the nature of the services, trade practice, surrounding circumstances and commercial expediency. The revenue cannot substitute its own view of a reasonable remuneration merely because it considers the payment excessive. The disallowance failed where there was no material to show that the arrangement was a sham, that the payment was not for business purposes, or that the enhanced commission was patently excessive so as to negate business justification.

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Issues: Whether commission paid to a genuine selling agency in excess of 5% of turnover was disallowable as not laid out wholly and exclusively for the purposes of the assessee's business.

Analysis: The allowance of remuneration or commission depends on the nature of the services, trade practice, surrounding circumstances, and whether the payment is genuine and commercially expedient. Where the recipient entity is genuine and has rendered services, the revenue cannot substitute its own view of what would be a reasonable payment merely because it considers the amount excessive. The tribunal's disallowance rested on subjective assessment rather than on material showing that the payment was not for business purposes or that the arrangement was a sham. The agency here was genuine, had rendered services, and there was no material to show that the enhanced commission was patently excessive or lacking business justification.

Conclusion: The excess commission was allowable as business expenditure; the disallowance was not justified and the answer was against the revenue.

Ratio Decidendi: When a payment to a genuine recipient is shown to have been made for services actually rendered, the revenue may disallow it only if material establishes that it was not incurred wholly and exclusively for business or was so patently excessive as to negate commercial expediency; the revenue cannot determine a notional reasonable remuneration on subjective standards.

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