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Issues: Whether the commission paid to the general manager was an expenditure laid out or expended wholly and exclusively for the purpose of the assessee's business under section 10(2)(xv) of the Income-tax Act, 1922.
Analysis: The question whether an amount is laid out wholly and exclusively for business purposes depends on the facts and circumstances of each case, but the final conclusion is one of law. In judging commercial expediency, reasonableness of the expenditure must be viewed from the standpoint of the businessman and not from that of the income-tax authorities. The Tribunal could reject a claim if the payment was not real, was not incurred in the character of a trader, or was not for business purposes, but it could not substitute its own view of what remuneration ought to have been paid. The circumstances showing the employee's special role, the condition of the mill, and the business considerations behind the commission clause supported the assessee's claim.
Conclusion: The entire amount of commission was held to be expenditure laid out wholly and exclusively for the purpose of the assessee's business, and the disallowance was not sustainable.
Ratio Decidendi: For section 10(2)(xv), the allowability of business expenditure must be tested by commercial expediency from the businessman's point of view, and tax authorities cannot fix or substitute their own notion of reasonable remuneration where the payment is genuine and business-related.
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