Business expenditure deduction requires proof of genuine commercial purpose, not just an agreement and payment.

A deduction for payments to a sole selling agent depends on proof that the expenditure was actually laid out wholly and exclusively for business purposes. The mere existence of an agency agreement and proof of payment does not by itself establish deductibility; the surrounding facts must show that the arrangement was genuinely acted upon and that services were rendered commensurate with the payment. On the unchallenged facts, sales were made directly by the assessee and no adequate basis for the payment was shown, so the deduction was not allowable and the revenue's challenge succeeded.

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Issues: Whether the amount paid to the sole selling agent was wholly and exclusively laid out for the purpose of the assessee's business and therefore deductible as business expenditure.

Analysis: The assessee relied on the existence of the agency agreement and the actual payment made under it. The revenue authorities found, on unchallenged facts, that the sales were made directly by the assessee, there was no evidence of services rendered commensurate with the payment, and the agreement had not been shown to have been acted upon in the manner claimed. The governing principle is that the mere existence of an agreement and payment thereunder does not conclude the whether the outlay was in fact incurred wholly and exclusively for business purposes; that fact must be established on the evidence and surrounding circumstances of the particular case.

Conclusion: The payment was not proved to have been made wholly and exclusively for the purposes of business, and the deduction was not allowable.

Final Conclusion: The reference was answered against the assessee and the revenue's challenge succeeded, with costs awarded to the Commissioner.

Ratio Decidendi: A contractual liability and actual payment do not by themselves establish admissibility of a deduction; the assessee must prove on the facts that the expenditure was in truth laid out wholly and exclusively for business.

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