Business expenditure and depreciation claims upheld where remuneration was genuinely paid and prior precedent supported the allowance.

Full remuneration paid to the managing director and director was held allowable as business expenditure because the payment was genuine and laid out wholly and exclusively for business purposes; the revenue could not disallow it merely by substituting its own view of what was reasonable. Initial and extra depreciation was also held admissible for diesel engines and bodies fitted to old chassis, the issue being covered by binding precedent on the same statutory allowance. The reference was answered entirely in favour of the assessee.

---

---

Issues: (i) Whether the full remuneration paid to the managing director and director was allowable as business expenditure under section 10(2)(xv) of the Indian Income-tax Act, 1922. (ii) Whether initial and extra depreciation was admissible under section 10(2)(via) of the Indian Income-tax Act, 1922 in respect of diesel engines and bodies fitted to old chassis.

Issue (i): Whether the full remuneration paid to the managing director and director was allowable as business expenditure under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The fact of payment of remuneration was not in dispute. The question was whether the expenditure was laid out wholly and exclusively for the purpose of business. The allowance of remuneration to directors is ordinarily a matter of business expediency for the company and its board, and the revenue cannot substitute its own view merely by assessing what would have been a reasonable amount of remuneration. On the facts, there was no material to show that the payment was not genuinely made as remuneration or that it was outside the business purpose.

Conclusion: The full remuneration was allowable, and the issue was answered in favour of the assessee.

Issue (ii): Whether initial and extra depreciation was admissible under section 10(2)(via) of the Indian Income-tax Act, 1922 in respect of diesel engines and bodies fitted to old chassis.

Analysis: The issue was covered by binding decisions already applicable to the facts. The allowance was held admissible in respect of diesel engines, and the same principle applied to bodies fitted to old chassis.

Conclusion: The depreciation claim was admissible, and the issue was answered in favour of the assessee.

Final Conclusion: The reference was answered entirely in favour of the assessee, with costs.

Ratio Decidendi: Where remuneration is in fact paid as business expenditure and is shown to be laid out for the business purpose, the revenue cannot reduce the deduction by substituting its own assessment of what is a reasonable remuneration; the test is whether the outgoing is genuinely and wholly incurred for the business.

---