Shareholder payment to compensate other directors was not deductible because it was not his own business expense or income-earning outlay.

A shareholder could not deduct amounts paid to other directors where the underlying loss belonged to the company and not to him personally. The court held that the payment was not expenditure incurred for the shareholder's own business, nor an amount laid out to facilitate any business belonging to him under the Indian Income-tax Act, 1922. It was also not shown that the payment was made to earn dividends or directors' fees, or that such income would have been withheld absent the payment. The deduction claim under sections 10(1), 10(2)(xv), and 12 therefore failed.

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Issues: Whether the assessee was entitled to deduct the amount paid to the other directors as a business loss or expenditure under section 10(1), section 10(2)(xv), or section 12 of the Indian Income-tax Act, 1922.

Analysis: The loss arising from the company's inability to obtain the expected subsidy was held to be the company's loss, not the assessee's. The assessee, being only a shareholder, could not treat the payment made to the other directors as expenditure incurred for the purposes of his own business or as an amount laid out to facilitate the carrying on of any business belonging to him. The payment was also not shown to have been made to earn dividends or director's fees, nor was there anything to indicate that such income would have been withheld had the payment not been made.

Conclusion: The amount was not deductible under section 10(1), section 10(2)(xv), or section 12 of the Indian Income-tax Act, 1922, and the question was answered against the assessee.

Ratio Decidendi: A shareholder cannot claim as deductible his payment made to compensate other directors for a loss belonging to the company unless the expenditure is shown to have been incurred for his own business or for earning taxable income.

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