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Claim for deduction of salaries paid to coparceners under section 10(2)(xv) of the Income-tax Act. Analysis: The case involved a Hindu undivided family (HUF) comprising of members engaged in a partnership business. The dispute arose when the assessee claimed a deduction of salary paid to coparceners under section 10(2)(xv) of the Income-tax Act. The Income-tax Officer disallowed most of the claim, stating it was to reduce taxation, not commercial expediency. The Appellate Assistant Commissioner upheld this decision. The Tribunal allowed deduction for some coparceners but not for others, based on services rendered. The High Court was asked to determine if the deduction was valid under section 10(2)(xv) of the Income-tax Act. The assessee argued that the salaries paid to coparceners were for commercial expediency to earn profits from the partnership business. Citing legal precedents, the assessee contended that if the expenses were incurred for earning profits, they should be deductible. However, the Income-tax Officer found that certain coparceners did not contribute to the business or profits. The Appellate Assistant Commissioner also held the payments were excessive and unreasonable, aimed at tax reduction. The High Court noted that the finding of fact was against the assessee, as there was no link between payments to certain coparceners and profits earned. The High Court emphasized that the determination of whether expenses were laid out wholly and exclusively for business purposes is a factual inquiry for the tax authorities. Mere existence of an agreement and payment does not guarantee deductibility. Factors like relation between parties, quantum of payment, and services rendered are crucial. The Court cited a Bombay High Court case to support this principle. In this case, the High Court found evidence supporting the tax authorities' conclusion that payments to certain coparceners were not justified by commercial expediency. Conclusively, the High Court held that the assessee was not entitled to the deduction claimed under section 10(2)(xv) of the Income-tax Act. The question of law was answered against the assessee and in favor of the Income-tax Department.
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