Business expenditure on directors' remuneration upheld where payments matched legitimate needs and were not shown excessive.

Payments of remuneration and commission to directors and another employee were not excessive or unreasonable under section 10(4A) of the Indian Income-tax Act, 1922, because the assessee's substantial turnover and dispersed business operations justified the expenditure. The Court noted that the head-office expense base was modest, the impugned sums were made for attending to the business, and there was no material showing that the amounts exceeded legitimate business needs or the benefit derived. Disallowance was therefore not justified, and the issue was decided in favour of the assessee.

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Issues: Whether the disallowance of part of the remuneration and commission paid to the directors and another employee under section 10(4A) of the Indian Income-tax Act, 1922, was justified as being excessive or unreasonable.

Analysis: The assessment years in question involved substantial turnover and multiple producing and distributing centres, while the head-office expenditure remained modest and included the impugned payments. On the facts, the payments were found to have been made for attending to the assessee's business, and there was no material to show that they were excessive or unreasonable having regard to the legitimate business needs of the assessee and the benefit derived therefrom.

Conclusion: The disallowance was not justified and the question was answered in favour of the assessee and against the revenue.

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