Exemption for commission payments failed because the notification's cumulative tax-assessment conditions were not fully satisfied.

Exemption under the notification depended on three cumulative conditions: the commission had to be paid out of, or determined by reference to, business profits; the amount had to be disallowed as a deduction because of that mode of payment or determination and included in business profits; and income-tax had to be assessed and charged under the head "business" on the disallowed sum. The object was to avoid double taxation. The Court noted that even if the commission was paid out of profits, the disallowance was not shown to have resulted from the manner of payment or determination. More importantly, "charged" required actual assessment and levy under the business head, which was not established. Exemption was therefore unavailable.

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Issues: Whether the assessee was entitled to exemption under the notification in respect of commission paid to him when the amount disallowed in the firm's assessment had allegedly been included in the firm's business profits and subjected to income-tax.

Analysis: The notification granted exemption only if three conditions were satisfied cumulatively: the amount must have been paid out of or determined with reference to the profits of the business, it must have been disallowed as a deduction because of that mode of payment or determination and included in the business profits, and income-tax must have been assessed and charged under the head "business" on the amount so disallowed. The object of the notification was to prevent double taxation. Even assuming that the commission had been paid out of profits, the Court held that the disallowance had not been shown to have been made because of the manner of payment or determination. More importantly, the word "charged" in the notification did not mean only statutory liability under the charging provision, but required that tax must in fact have been assessed and levied on the sum under the head "business".

Conclusion: The assessee was not entitled to the exemption, because the third condition in the notification was not satisfied.

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