Business expenditure and unrealised derivatives loss were treated as allowable where linked to operations and not barred by law.

Client assistant charges paid in the course of a brokerage business were treated as allowable business expenditure because the payment was actually incurred for business operations, and a third party's benefit from the arrangement did not make the expense inadmissible absent any legal prohibition. Unrealised loss on open futures and options positions was also treated as allowable, as a conservative provision connected with the business and not merely a disallowable notional loss. The commentary notes that the deductions were upheld on these principles and that no substantial question of law arose on the proposed issues.

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Issues: (i) Whether client assistant charges paid to ICICI Bank Ltd. were allowable as business expenditure; (ii) Whether unrealized loss on open positions in futures and options was disallowable as a contingent or notional loss.

Issue (i): Whether client assistant charges paid to ICICI Bank Ltd. were allowable as business expenditure.

Analysis: The expenditure was found to have been actually incurred in the course of the assessee's brokerage business. The fact that ICICI Bank Ltd. benefited from the three-in-one account arrangement, or that no separate charge was recovered for services rendered to the bank, was held to be irrelevant to allowability. Even if the payment amounted to sharing of brokerage, no legal prohibition against such sharing was shown, and the payment remained connected with the assessee's business operations.

Conclusion: The disallowance was not sustainable and the issue was answered in favour of the assessee.

Issue (ii): Whether unrealized loss on open positions in futures and options was disallowable as a contingent or notional loss.

Analysis: The loss was treated as a provision made on a conservative basis and, even assuming it to be contingent, it was held to be allowable as a deduction. The matter was considered covered by the Supreme Court's ruling on the allowability of such losses, and the revenue's contention that the loss was merely notional was rejected.

Conclusion: The loss was held allowable and the issue was answered in favour of the assessee.

Final Conclusion: No substantial question of law arose on either proposed question, and the appeal failed.

Ratio Decidendi: Business expenditure is not disallowable merely because a third party also benefits from the arrangement, and a provision for loss made on a conservative basis may be allowable where it is connected with the business and not barred by law.

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