Business deduction requires real nexus: payment for divine blessings was not allowable as expenditure

Expenditure is deductible only if it is laid out wholly and exclusively for carrying on the business with a real business nexus. A payment to a pujari for invoking divine blessings for business prosperity lacked any direct relationship to the assessee's business operations and was not incurred in the capacity of carrying on that business. The doctrine of commercial expediency could not cure the absence of the basic statutory requirement. The claimed payment was therefore not an admissible deduction under the Income-tax Act, 1922, and the reference was answered in favour of the Revenue.

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Issues: Whether salary paid to a pujari for invoking divine blessings for business prosperity was an admissible deduction as expenditure laid out wholly and exclusively for the purpose of business under the Income-tax Act, 1922.

Analysis: The statutory test requires that the expenditure be incurred for carrying on the business and in the assessee's capacity as a person carrying on that business. The expression 'for the purpose of the business' is wide, but its limits are implicit in the requirement that the expenditure must have a real business nexus. The claimed payment for supernatural blessings had no direct relationship with the carrying on of the assessee's business. The doctrine of commercial expediency does not assist where the first requirement of admissibility itself is not satisfied.

Conclusion: The expenditure was not an admissible deduction and the answer to the reference was in the negative, in favour of the Revenue.

Ratio Decidendi: Expenditure is deductible only if it is laid out wholly and exclusively for carrying on the business, and a claim founded on religious or supernatural assurance without a direct business nexus does not satisfy that statutory test.

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