Commercial expediency test bars deduction for payments made to family members for partnership work, not family business.

A deduction under section 10(2)(xv) of the Income-tax Act, 1922 was available only for expenditure incurred wholly and exclusively for the assessee's business and satisfying commercial expediency. Where a Hindu undivided family was represented by its karta in a partnership, the firm was a distinct entity and the family had no separate place in that firm. Payments made by the family to junior members for services rendered to the partnership business were therefore not expenditure for the family business, so the claimed deduction was not admissible and the claim failed.

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Issues: Whether remuneration paid by a Hindu undivided family to its junior members for services rendered to a partnership firm in which the family was represented by its karta was deductible under section 10(2)(xv) of the Income-tax Act, 1922 as expenditure wholly and exclusively for the family business.

Analysis: A deduction under section 10(2)(xv) is available only where the expenditure is incurred for the business of the assessee and satisfies the test of commercial expediency. Where a Hindu undivided family is a partner through its karta, the partnership is a distinct entity and the family, as such, has no place in the firm. Services rendered to the partnership therefore cannot be treated as services rendered to the Hindu undivided family itself. Since the payments in question were made for work done for the partnership business and not for the family business, the expenditure could not be said to have been laid out wholly and exclusively for the family.

Conclusion: The deduction was not admissible; the answer to the reference was correctly given against the assessee and the claim failed.

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