Deductibility under Section 10(2)(xv): director remuneration not deductible where payments were not for special services and reflected market gains.

Whether remuneration paid to five directors qualified as expenditure wholly and exclusively for business under Section 10(2)(xv) is examined: appellate authorities found on the facts that payments were not for special services, managing agents performed substantive work, and profit increase resulted from market conditions rather than directors' exertions; reliance on a solitary practice elsewhere was insufficient. Authorities may probe surrounding circumstances despite a board resolution and actual payment. Operative effect: the remuneration payment was held not deductible under the provision.

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Issues: Whether the sum of Rs. 1,11,090 paid as remuneration to the five directors was an expenditure incurred wholly and exclusively for the purposes of the business within the meaning of Section 10(2)(xv) of the Income-tax Act, 1961.

Analysis: The assessing authorities and the Appellate Tribunal found that the additional payment was not for special services by the directors, that the managing agents carried out the substantial work of the company, and that the abnormal increase in profits arose from market conditions (lifting of control) rather than directors' exertions. The Tribunal also rejected reliance on a solitary example of practice in another company as insufficient evidence. The appellate authorities were entitled to examine the surrounding circumstances and to determine on the facts whether the payment was incurred wholly and exclusively for business purposes; mere existence of a resolution and actual payment does not preclude such inquiry.

Conclusion: The payment is not deductible under Section 10(2)(xv) of the Income-tax Act, 1961; decision against the assessee (in favour of the revenue).

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