Commercial expediency and reasonable employee benefits govern deductibility of business expenditure and house rent allowances.

Business expenditure is deductible when, judged from the businessman's point of view, it is commercially expedient and incidental to carrying on the business; on that basis, the cost of chartering a plane to bring back a deceased former chairman's body was treated as allowable because he had travelled on company business and the company would otherwise have borne his return expenses. A reasoned estimate of reasonable house rent paid to a director under service terms will not be disturbed unless shown to be unreasonable or made without application of mind; here, the lower allowance already fixed by the Tribunal was upheld because the relevant facts had not materially changed.

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Issues: (i) Whether the expenditure incurred for chartering a plane to take the dead body of a former chairman back to Jodhpur was incidental to the business and allowable as a deduction. (ii) Whether the disallowance of part of the house rent paid to a director under his service terms was justified.

Issue (i): Whether the expenditure incurred for chartering a plane to take the dead body of a former chairman back to Jodhpur was incidental to the business and allowable as a deduction.

Analysis: The expression "for the purpose of the business" is of wide amplitude, but its limits are that the expenditure must be incurred in the course of carrying on the business and in the assessee's capacity as a person carrying on that business. Applying the test of commercial expediency, the cost of returning the deceased chairman's body was treated as a liability incidental to the business, especially since the deceased had come to Delhi on the company's business and the company would otherwise have borne his return travel expenses.

Conclusion: The expenditure was incidental to the business and was allowable; the answer was in favour of the assessee.

Issue (ii): Whether the disallowance of part of the house rent paid to a director under his service terms was justified.

Analysis: The Tribunal had already considered the director's salary, the provision of furnished residence and conveyance, and the rent actually paid, and had earlier estimated a reasonable allowance at a lower figure. As the company's financial position and the nature of the employment had not materially changed, the Tribunal's estimate was not shown to be unreasonable or without application of mind.

Conclusion: The disallowance of part of the house rent was justified; the answer was in favour of the revenue.

Final Conclusion: The reference was disposed of by answering one question for the assessee and the other for the revenue, leaving no order as to costs.

Ratio Decidendi: An expenditure is deductible if, judged from the businessman's point of view, it is commercially expedient and incidental to carrying on the business, and a reasoned estimate of reasonable expenditure on employee benefits will not be disturbed unless shown to be unreasonable.

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