Karta remuneration as business expense is deductible when supported by agreement, real services, and commercial expediency.

Remuneration and bonus paid by a Hindu undivided family to its karta may be deductible as business expenditure when supported by an agreement made by or on behalf of the family and when the karta renders real services to the business. The governing test is commercial expediency: if the payment is incurred wholly and exclusively for the family business and is not shown to be excessive or unreasonable, the claim is genuine. On those facts, the deduction was allowable and the disallowance could not stand.

---

---

Issues: Whether remuneration and bonus paid by a Hindu undivided family to its karta for managing the family business was deductible as business expenditure.

Analysis: Remuneration paid to a karta can be treated as expenditure incurred wholly and exclusively for the purpose of the family business when it is paid under an agreement by or on behalf of the family. The governing principle is that such payment is justified on grounds of commercial expediency if the karta renders real services to the business. The presence of a valid written agreement and actual payment supported the genuineness of the claim, and the amount was not shown to be excessive or unreasonable.

Conclusion: The deduction was allowable and the disallowance was not sustainable.

---