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Interpretation of Section 10(2)(xv) for allowance of expenses incurred for business purposes. Analysis: The case involved an assessee, a limited company engaged in importing dyestuffs and chemicals from its parent company in Switzerland, who paid a representative a commission for pushing sales. Initially, the representative was paid 12? per cent on net sales, which included contingency expenses. Subsequently, the commission was split, allocating 5 per cent specifically for contingency expenses. The company claimed these payments as allowable deductions under Section 10(2)(xv) for the assessment years 1948-49 and 1949-50. The taxing department denied the deduction, leading to the matter being referred to the High Court. To qualify for an allowance under Section 10(2)(xv), the assessee must demonstrate that the expenditure claimed was laid out wholly and exclusively for the business's purpose. The distinction between Section 10(2)(xv) and Section 10(2)(x) was highlighted. While Section 10(2)(x) pertains to bonus or commission paid to employees, Section 10(2)(xv) requires proof of necessity and exclusivity of the expense for business purposes. The Tribunal's decision was based on the requirement of actual payment by the representative to justify the allowance, citing a previous judgment. The Tribunal's reliance on a prior case's interpretation was challenged by the High Court. The Court clarified that the focus should be on the payment by the assessee to the representative, not the representative's subsequent payments. The Court emphasized the commercial necessity or expediency of the expense rather than its reasonability. It was noted that the department did not question the necessity of the commission for the business, indicating its acceptance of the expense's commercial purpose. The Court concluded that the assessee was entitled to the deduction under Section 10(2)(xv) as the payments to the representative were necessary for the business's operation. The judgment favored the assessee's claim for the deduction, emphasizing the commercial justification for the expenses incurred. The Court answered the question in the affirmative, directing the Commissioner to bear the costs and confirming the allowance of the claimed deductions. Overall, the judgment clarified the criteria for claiming deductions under Section 10(2)(xv) and underscored the importance of demonstrating the commercial necessity of expenses incurred for business purposes to qualify for allowances.
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