Remuneration to relative-employee was not deductible where payment was not wholly and exclusively for business purposes.

Deductibility of remuneration paid to a relative-employee under section 10(2)(xv) of the Income-tax Act, 1922 depended on whether the expenditure was laid out wholly and exclusively for business purposes, not merely on proof of payment or the existence of an agreement. On the evidence, the employee lacked real business training or experience, had not performed the responsible duties described in the agreement, and the payment was grossly disproportionate to the work done. Concurrent factual findings by the income-tax authorities and the Tribunal were not shown to be perverse or unsupported, so the disallowance of part of the remuneration was justified.

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Issues: Whether the disallowance of part of the remuneration paid to a relative-employee was justified under section 10(2)(xv) of the Income-tax Act, 1922, as not being expenditure laid out or expended wholly and exclusively for the purpose of the assessee's business.

Analysis: Deductibility under section 10(2)(xv) depended not merely on proof of actual payment or the existence of an agreement, but on whether the expenditure was incurred wholly and exclusively for business purposes. The authorities found on evidence that the employee was a young undergraduate with no real training or experience in business administration, that he had not in fact been entrusted with the responsible functions described in the agreement, and that the amount paid was grossly disproportionate to the work done. The findings were concurrently recorded by the income-tax authorities and the Tribunal, and no perversity or absence of evidence was shown.

Conclusion: The disallowance was justified, because the payment was not expenditure laid out or expended wholly and exclusively for the purpose of the business.

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