Business expenditure deduction depends on business purpose and legality, not on a third party's separate sanction issue.

A business expenditure is deductible where it is incurred for the assessee-company's own business purposes and is not shown to be illegal or outside the ordinary course of business. The Calcutta HC note states that the assessee validly appointed an employee and assumed liability to pay his remuneration; the earlier lack of governmental sanction affecting the managed company did not render the assessee's payment unlawful. The Tribunal's finding that the expense was incurred for the assessee's business was not displaced, so the payment was allowable as business expenditure.

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Issues: Whether the sum of Rs. 20,482 paid by the assessee-company was allowable as business expenditure.

Analysis: The payment to the managed company arose after the assessee-company validly appointed the employee in question and assumed liability to pay his remuneration. The earlier absence of governmental sanction under the Companies Act affected the position of the managed company, but did not make the assessee-company's own payment illegal. The Tribunal's finding that the expenditure was incurred for the purposes of the assessee's business was not displaced, and the payment was not shown to be outside the ordinary course of business or prohibited so as to deny deduction.

Conclusion: The expenditure was allowable as business expenditure and the answer was in favour of the assessee.

Ratio Decidendi: A payment incurred in the course of business is deductible where it is made for the assessee's business purposes and is not shown to be illegal or on behalf of a third party in a manner unrelated to the business.

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