Commercial expediency allows deduction of bona fide agent remuneration incurred to protect and manage a business interest.

Remuneration paid to an agent for managing day-to-day partnership affairs and protecting the assessee's business interest was treated as deductible business expenditure under section 10(2)(xv) of the Income-tax Act, 1922. The court applied the settled test of commercial expediency and accepted that an assessee with a substantial profit share, residing away from the business place and unable to supervise personally, may incur such expenditure bona fide to facilitate business. Because the agreement was genuine, the amount was not shown to be excessive, and no extra-commercial consideration was established, the payment satisfied the requirement of being laid out wholly and exclusively for business.

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Issues: Whether remuneration paid by the assessee to an agent for attending to the day-to-day affairs of the partnership and protecting the assessee's interest therein was an allowable deduction under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The payment was examined in the light of the settled test of commercial expediency. The assessee had a substantial profit share and financial stake in the partnership, was residing outside the place of business, and was not in a position to attend personally to the management or protect his interest. The agreement with the agent was genuine, the remuneration was not shown to be excessive, and no extra-commercial consideration was established. Expenditure incurred voluntarily on grounds of commercial expediency to facilitate the carrying on of business can satisfy the statutory requirement of being laid out wholly and exclusively for the purpose of business.

Conclusion: The payment was an admissible deduction and the question was answered in the affirmative, in favour of the assessee.

Ratio Decidendi: Expenditure incurred bona fide on grounds of commercial expediency to facilitate the carrying on of business, including remuneration paid to an agent for protecting and managing the assessee's business interest, is deductible if it is laid out wholly and exclusively for the purpose of business.

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