Exemption for special remuneration depends on cumulative conditions, including profit-linked payment and corresponding disallowance of deduction.

Special remuneration was exempt under the 1928 notification only if all prescribed conditions were cumulatively satisfied, including that the payment was made out of, or determined with reference to, business profits and that the corresponding deduction had been disallowed on that basis. Because the payer-company's deduction was disallowed as not wholly and exclusively for business, and not because the payment was treated as profit-linked remuneration within the notification, the exemption condition was not met. The receipt of Rs. 60,000 was therefore assessable.

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Issues: Whether the sum of Rs. 60,000 received by the assessee as special remuneration was exempt from assessment under Finance Department Notification No. 878-F dated March 24, 1928.

Analysis: The notification exempts receipts such as salary, bonus, commission or other remuneration only when the prescribed conditions are cumulatively satisfied. One essential condition is that the amount must have been paid out of or determined with reference to the profits of the business and, by reason of that mode of payment, must not have been allowed as a deduction while having been included in the business profits on which tax was charged. The corresponding deduction claimed by the payer-company had been disallowed on the ground that the expenditure was not wholly and exclusively laid out for the purpose of business. Since the disallowance was not on the footing that the payment was made out of profits within the meaning of the notification, the requisite condition for exemption was not fulfilled.

Conclusion: The assessee was not entitled to exemption under the notification and the receipt of Rs. 60,000 was assessable.

Ratio Decidendi: Exemption under the notification is available only when all the prescribed conditions are cumulatively satisfied, including that the corresponding payment was disallowed as a deduction because it was paid out of or determined with reference to business profits.

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