Wholly and exclusively for business purposes: remuneration influenced by extra-commercial considerations was partly disallowed.

Remuneration paid under an agreement is deductible only if it is laid out wholly and exclusively for business purposes under section 10(2)(xv) of the Income-tax Act, 1922. The existence of a board resolution, payment vouchers and some services rendered does not preclude examination of the real character of the expenditure. On the facts, the adviser's close connection with those controlling the company, absence of special technical training and payment materially above normal levels justified the inference that extra-commercial considerations affected the fixation of remuneration. The disallowance was upheld, and the claim to full deduction failed.

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Issues: Whether remuneration paid to a technical adviser, fixed by agreement but found to have been influenced by extra-commercial considerations, was deductible as expenditure laid out wholly and exclusively for the purposes of the business under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: Deductibility depended on whether the payment satisfied the statutory test of being laid out wholly and exclusively for business purposes. The existence of a resolution, payment vouchers and some service rendered did not prevent scrutiny of the real character of the expenditure. The authorities found that the adviser was closely connected with those controlling the company, lacked special technical training, and was paid remuneration materially above what was normally payable. On those facts, the Tribunal was justified in inferring that extra-commercial considerations influenced the fixation of remuneration, and the High Court was competent in reference to interfere with the erroneous legal inference drawn from the facts.

Conclusion: The expenditure was not fully deductible to the extent found by the taxing authorities; the disallowance was upheld and the assessee's claim failed.

Ratio Decidendi: Where remuneration paid under an agreement is influenced by extra-commercial considerations, the taxing authority may disallow the portion that is not shown to have been incurred wholly and exclusively for the purposes of the business.

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