Professional tax is not a business deduction when it is a levy arising from carrying on the business rather than earning profits.

Professional tax paid under the Punjab Professions, Trades, Callings and Employments Act, 1956 was not expenditure laid out wholly and exclusively for the purpose of business under section 10(2)(xv) of the Indian Income-tax Act, 1922. The levy arose because the assessee carried on the business, so it was treated as a contribution from income rather than an operating business expense. On that reasoning, the deduction failed under section 10(2)(xv), and it was unnecessary to decide whether section 10(4) separately excluded the claim.

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Issues: Whether professional tax paid by the assessee under the Punjab Professions, Trades, Callings and Employments Act, 1956 was allowable as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922, or was excluded by section 10(4) of that Act.

Analysis: The relevant test under section 10(2)(xv) was whether the amount was expenditure laid out or expended wholly and exclusively for the purpose of the business. The tax in question was not an outlay incurred for carrying on or earning the profits of the business, but a levy arising because the assessee carried on the business. A payment of this nature was treated as a contribution from income and not as expenditure for the purpose of business. On that basis, the claim did not satisfy section 10(2)(xv), and it was unnecessary to decide whether section 10(4) also independently barred the deduction.

Conclusion: The professional tax was not an allowable deduction under section 10(2)(xv) and the question was answered in the negative, against the assessee and in favour of the Revenue.

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