http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

PETITIONER: DHARAMVIR DHIR

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX,BIHAR & ORISSA

DATE OF JUDGMENT: 05/01/1961

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1961 AIR  668            1961 SCR  (3) 359  CITATOR INFO :  R          1965 SC 321  (17)  R          1966 SC1053  (18)  D          1976 SC 640  (5,9)

ACT: Income-tax--Deductions--Expenditure incurred for purpose  of trade--Assessee paying share of profits in return of advance made--Whether  allowable deductions--Indian Income-tax  Act, 1922 (11 of 1922), ss. 10 (2)(iii) and 10(2)(xv).

HEADNOTE: The  assessee  entered into a contract for  working  certain collieries.   As  he did not have the  requisite  funds,  he entered into an agreement with M whereunder M was to advance a  sum upto Rs. 11/2 lacs, but could withdraw the  money  at any  time and stop further advances and was not  liable  for any losses; the assessee was to pay interest on the advances at  6% per annum in addition to a sum equivalent to  11/16th of  the  net profits of the business.  In pursuance  of  the agreement  M made advances to the assessee and the  assessee paid  interest  and  11/16th of his net profits  to  M.  The assessee  claimed  these  amounts paid  to  M  as  allowable deductions under s. 10(2)(iii) or under s. 10(2)(xv) of  the Income-tax Act.  The amount paid as interest was allowed but the  other  sums paid were not allowed on  the  ground  that these sums were not wholly and exclusively laid out for  the purpose of the business. Held,  that  the  assessee was entitled  to  the  deductions claimed.  The case had to be decided according to the  tenor of  the  agreement and the circumstances of  the  case.   In order to justify the deduction of the sum given up had to be for  reasons of commercial expediency; it may  be  voluntary but  so long as it was incurred for the assessee’s  benefit, e.g.,  the  carrying on of his business, the  deduction  was claimable.   In the present case there was nothing  to  show that the assessee could have made any better arrangements or would not have lost the contract had he not entered into the agreement  with  M.  Therefore in  a  commercial  sense  the payments were an expenditure wholly and exclusively laid out for the purpose of the business. Commissioner of Income-tax v. Chandulal Keshavlal, [1960] 38

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

I.T.R. 601, followed. Commissioner  of  Income-tax,  Bombay  v.  M/s.   jaggannath Kissonlal,  [1961]  2 S.C.R. 644, M/s.  Haji  Aziz  &  Abdul Shakoor  Bros. v. The Commissioner of Income-tax,  [1961]  2 S.C.R.  651,  and Strong v. Woodifield, (1906) 5  T.C.  215, relied on. Pondicherry  Railway Company v. Commissioner of  Income-tax, Madras, (1931) L.R. 58 I.A. 239, distinguished. Union Cold Storage Co. Ltd. v. Adamson, (1931) 16 T.C. 293, 360 Tata   Hydro-Electric   Agencies   Ltd.,   Bombay   v.   The Commissioner  of Income-tax, Bombay Presidency. (1937)  L.R. 64  I.A.  215, Robert    Addie & Sons’  Colleries,  Ltd,  v. Commissioners   of   Inland  Revenue,   (1924)   S.C.   231, Commissioner of Income-tax, Bombay Presidency v.  Tata  Sons Ltd.  [1939]  7  I.T.R.  195, The  Indian  Radio  and  Cable Communications  Company Ltd. v. The Commissioner of  Income- tax,      Bombay,   [1937]  5  I.T.R.  270,  British   Sugar Manufacturers Ltd. v. Harris, [1937] 21  T.C.  528, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 448 and 449 of 1959. Appeals  by special leave from the judgment and order  dated February  12,  1958,  of  the  Patna  High  Court  in  Misc. Judicial Cases Nos. 679 and 680 of 1955. A.  V. Viswanatha Sastri and Naunit Lal, for  the  appellant (In both the appeals). A.  N. Kripal and D. Gupta, for the Respondent (In both  the appeals). 1961.  January 5. The Judgment of the Court was delivered by      KAPUR,  J.-These  appeals by the assessee  are  brought against  two  judgments  and orders of  the  High  Court  of Judicature at Patna in Income-tax references under s.  66(2) of  the  Income  Tax  Act answering  the  questions  in  the negative and against the assessees.  The questions were:               (1)..."Whether on the facts and  circumstances               of  this  case Rs. 72,963-12-0 was  a  revenue               expenditure    deductible    under     section               10(2)(iii)  or under section 10(2)(xv) of  the               Indian Income Tax Act?"               (2)..."Whether on the facts and  circumstances               of  this  case Rs. 76,526-1-3  was  a  revenue               expenditure    deductible    under     section               10(2)(iii)  or under section 10(2)(xv) of  the               Indian Income-tax Act?" The  facts  of the appeals are these: The appellant  was  an employee of M/s.  Karam Chand Thapar & Bros. and for each of the accounting years relating to the assessment years  1947- 48  and 1948-49 his salary was Rs. 10,572.  He also  had  an income  of  Rs.  500  from shares  in  certain  joint  stock companies.  On December 20, 1945, he entered into a contract with 361 Bengal  Nagpur  Coal  Company Ltd., for  raising  coal  from Bhaggatdih   Colliery,  Jharia  and  actually  started   his business  from January 1, 1946.  Evidently he did  not  have the requisite funds for his business and therefore in  order to finance it, he entered into an agreement with the  Mohini Thapar Charitable Trust on February 25, 1946.  The trust  is a  public charitable trust, which was created by Lala  Karam Chand  Thapar,  who  constituted  himself  as  the  Managing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

Trustee.   The relevant terms of this agreement between  the appellant and the trust were that the trust was to advance a sum  upto Rs.  11 lacs, the contract was to be  "carried  in accordance of the policy" settled between the appellant  and the  trust; the trust could withdraw its money at  any  time and to stop further advances; the trust was not to be liable for any losses; the appellant was to send monthly returns to the trust and the seventh clause was "that in  consideration of  the  trust  having agreed to finance  my  said  contract business  up  to Rs. 11/2 lacs I have agreed to pay  to  the trust interest on the amount from time to time owing to  the trust  in respect of the monies to be advanced as  above  at the rate of 6 p.c. per annum in addition to a sum equivalent to 11/16th of the net profits of this business of mine." In  pursuance  of  this  agreement  the  appellant,  besides interest,  paid to the trust the sum of Rs. 72,963  for  the first  accounting  year and Rs. 76,526-1-3  for  the  second accounting  year corresponding to years of assessment  1947- 48,1948-49 and claimed these amounts as allowable deductions under s. 10(2)(iii) or under s. 10(2)(xv) of the  Income-tax Act.  The amount of interest has been allowed but the  claim in  regard  to  the other sums paid was  disallowed  by  the Income-tax Officer on the ground that the agreement was  not genuine  and  bona  fide and that it  was  not  prompted  by ordinary  business considerations.  The matter was taken  in appeal  to the Appellate Assistant Commissioner  who  upheld the  order  of  the Income-tax Officer.  An  appeal  to  the Income-tax Appellate Tribunal was also dismissed and so  was an application 46 362 for  reference under s. 66(1), but the High  Court  directed the  Tribunal  to state the case on the  questions  set  out above.   For the two assessment years the question  was  the same   excepting  for  the  amounts  claimed  as   allowable deductions. In its order dated April 4, 1955, the Appellate Tribunal had found  that  the payments were not for the  purpose  of  the business  and  that taking into account the  nature  of  the accounts,  the nature of the payments and  the  relationship between  the parties, it could not be said that the  amounts were wholly and exclusively laid out for the purpose of  the business   and  therefore  rejected  the  claim.    In   the statement-  of  the  case the Tribunal  has  said  that  the average  amount which had been advanced by the trust to  the appellant in the first year was Rs. 18,100 and the  payments made to the trust in the two years were therefore a share of profits and not expenditure laid out wholly and  exclusively for the purposes of the business. The High Court approached the question from the same  angle. It was of the opinion that the question should be determined on principles of ordinary commercial trading and because the Managing  Trustee  was in a dominating position and  only  a small  sum of money i.e., Rs. 18,100 on an average had  been advanced, the payment of Rs. 72,963 in addition to  interest was an absurdly large sum which with the interest paid work- ed)  out at about 400% interest.  The High Court  also  took into  consideration  the  fact that  the  appellant  was  an employee  of Lala Karam Chand or his company.  Put in  their own  words  the High Court observed "having  regard  to  the relationship  between  the parties and having  examined  the clauses of the agreement of the 25th February, 1946, between the  assessee and the board of trustees I am of the  opinion that the real legal position in this case is that there is a joint  adventure  between the parties, a  quasi  partnership

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

which  falls  something short of partnership  and  that  the arrangement  between  the  parties was that  the  amount  of profits should be ascertained and then they shall divide  it up in certain specified proportions". 363 The payments, therefore, did not fall within s. 10(2)  (xv). The  question  was therefore answered in  the  negative  and against  the assessee.  The appellant has come in appeal  to this Court by special leave. As far as the record goes at the relevant time the appellant was a person of comparatively small means.  No doubt he  was getting a salary of Rs. 10,572 a year and had about Rs.  500 from his share holdings but beyond that he does not seem  to have  had any other means.  There is nothing to show on  the record  that he had any security to offer or did  offer  for the money that he was borrowing.  Thus the trust was lending monies to the extent of Rs. 11/2 lakhs without security  and upon   a  venture  which  might  or  might  not  have   been successful.   The Tribunal and the High Court seem  to  have fallen  into an error by taking a mean of the advances  made by  the Trust to the appellant during the  first  accounting year.   The  record  shows  that  the  advances  were   very considerable  in the first year ranging from Rs.  12,000  in January 1946 to Rs. 1,86,000 in July of that year and in the following months of that year they ranged from Rs. 59,000 to Rs. 7,000.  In the following years beginning from the end of 1946  to 1953 considerable sums of money had  been  advanced which ranged on an average from Rs. 1,97,000 in 1947 to  Rs. 3,17,000 in 1953. In regard to 1947, the Tribunal has  found that  the  average  amount  of loan  was  Rs.  1,20,317  but according  to the figures supplied by the appellant  in  his petition  for  special leave to appeal to  this  Court,  the average   comes   to  Rs.  1,97,919.   In  any   case   very considerable  sums of money had been advanced by  the  Trust and  as  we  have  said above to a  person  who  was  not  a businessman, who neither gave nor is shown to have been able to  give any security.  The agreement between the  appellant and  the trust has to be considered in the context of  those circumstances   and   if   taking   all   the    surrounding circumstances   into  consideration  the  trust   found   it necessary  to  have control over the working  and  over  the finances  and had offered stringent conditions it is  not  a matter which can be considered to be abnormal. 364 Another  matter  which was taken into consideration  by  the Tribunal  was that the amounts claimed as  deductible  items were shown as a share of profits of the trust which had been debited  in  the appellant’s profit and  loss  appropriation account or in other words the appellant as per his  accounts admitted that it was an appropriation of the profits to  the trust.   The  Tribunal  thus was of  the  opinion  that  the interest  to be received by the Trust was 11/16 part of  the profits  of the appellant’s business and that the method  of accounting  clearly  showed  that  the  appellant  was  only parting with the share of profits.  This, in our opinion, is an  erroneous approach to the question.  The case has to  be decided according to the tenor of the document as it  stands and  the circumstances of the case.  The genuineness of  the document  has not been challenged though an effort was  made by  the Revenue to so construe the document and so read  the facts as to make both the amounts liable to tax in the hands of the appellant. As  to what is a deductible expense has to be viewed in  the circumstances  of each case.  In Commissioner of  Income-tax v.  Chandulal  Keshavlal  (1) this Court  observed  that  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

deciding  whether  a  payment  of  money  is  a   deductible expenditure, one has to take into consideration the question of  commercial  expediency and the  principles  of  ordinary commercial  trading.   If  the  payment  or  expenditure  is incurred  for  the purpose of the trade of the  assessee  it does  not matter that the payment may enure for the  benefit of  a third party.  Another test laid down in that case  was whether  the transaction is properly entered into as a  part of the assessee’s legitimate commercial undertaking in order to  facilitate  the carrying out of its business and  it  is immaterial that a third party also benefits thereby. Thus in cases  like  the  present  one,  in  order  to  justify  the deduction the sum given up must be for reasons of commercial expediency.   It  may  be voluntary but so  long  as  it  is incurred for the assessee’s benefit e.g. the carrying on  of his   business,  the  deduction  would  be  claimable.    In Commissioner of Income-tax, (1)  [1960] 38 I.T.R. 601 365 Bombay  v. Jaggannath Kissonlal (1) the assessee executed  a promissory  note  jointly with another person  in  order  to raise  the money for himself and for the other.   The  other person  became  insolvent and the assessee had to.  pay  the whole  amount  and  claimed  that  amount  as  an  allowable deduction under s. 10(2)(xv) and it was found that it was  a practice  in  the  Bombay market to  borrow  money  on  such promissory  notes and there was an element of  mutuality  in the  transaction.   The loss sustained by the  assessee  was allowed as a deductible item on the basis that a  commercial practice  of  financing the business by borrowing  money  on joint  and  several liability was established. In  another case  decided by this Court M/s.  Haji Aziz & Abdul  Shakoor Bros. v. The Commissioner of Income-tax (2) it was held that the  expenses which are permitted as deductible are such  as are made for the purpose of carrying on the business i.e. to enable  a  person to carry on business and earn  profits  in that  business and the disbursements must be such which  are for the purpose of earning the profits of the business.  See also  Strong and Company of Romsey Ltd. v.  Woodifield  (3). These  cases therefore show that if any amount  is  expended which  is  commercially expedient and is  expended  for  the purpose of earning profits it is a deductible expenditure. In  support of their opinion the High Court relied upon  the cases  hereinafter mentioned but in our opinion they do  not apply  to  the facts and circumstances of  this  case.   The first  case  referred to is Pondicherry Railway  Company  v. Commissioner  of Income-Tax, Madras (4).  In that  case  the assessee  company,  incorporated  in  the  United   Kingdom, obtained  a  concession  of constructing a  railway  in  the territories of Pondicherry.  The assessee company was to pay to the French Government 1/2 of its net profits.  The French Government on its part gave land on which the railway was to be  built free of charge and also agreed to pay  a  subsidy. The  question  for  decision in that case  was  whether  the monies paid by the (1)  [1961] 2 S.C.R. 644. (3)  (1906) 5 T.C. 215. (2)  [1961] 2 S.C.R. 651. (4)  [1931] L.R. 58 I.A. 239. 366 assessee company to the French Government i.e.,  of its  net profits  were allowable as a deduction under the  provisions corresponding  to s. 10(2)(xv).  Lord Macmillan observed  at p. 251:-               "A  payment out of profits and  conditions  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

             profits  being  earned  cannot  accurately  be               described  as a payment made to earn  profits.               It  assumes that profits have first come  into               existence.   But profits on their coming  into               existence  attract tax at that point, and  the               revenue  is not concerned with the  subsequent               application of the profits." But these observations have been later on explained in other cases  to which reference will be made presently.  In  Union Cold  Storage  Co. Ltd. v. Adamson (1) the  assessee  leased lands  and  premises  abroad  reserving  a  rent  of   pound 9,60,000.   It was also provided in the deed that if at  the end of the financial year it was found that after  providing for  this  rent the result of the company’s  operations  was insufficient  to  pay interest on  charger,  and  debentures etc.,  the rent for the year was to be abated to the  extent of  the deficiency.  In computing its profits  the  assessee company  claimed  the sums of rent paid  in  two  respective years.   They were held not payable out of the  profits  or. gains and were allowable deductions.  At page 318 Rowlatt J. said that the sum which was to be paid by the company was  a recompense in respect of possession and use of the  premises abroad and the company had entered into some liabilities  by way  of payment for their premises and that payment  was  an outgoing  of the business which was to be provided  for  and allowed before profits of the business could be ascertained. In  the  House  of Lords Lord  Macmillan  distinguished  the Pondicherry  case,(1)  by  saying  that  in  that  case   the ascertainment of profits preceded the coming into  operation of  the  obligation  to  pay  and  when  profits  had   been ascertained the obligation was to make over  thereof to  the French Government.  Dealing with the passage above  referred to Lord Macmillan said at p. 331:-               "I  was  dealing  with a  case  in  which  the               obligation was, first of all, to ascertain the               profits in a (1) [1931] 16 T.C. 293. (2) (1931) L.R. 8 I.A. 239. 367               prescribed  manner,  after providing  for  all               outlays incurred in earning them, and then  to               divide them.  Here the question is whether  or               not  a  deduction for rent has to be  made  in               ascertaining the profits, and, the question is               not  one  of the distribution  of  profits  at               all." In  Tata  Hydro-Electric  Agencies Limited,  Bombay  v.  The Commissioner  of Income-tax, Bombay Presidency (1) the  Tata Power  Co.  entered into an agency agreement  with  Tatasons Ltd. agreeing to pay to Tatasons Ltd. a commission of 10% on the  annual  net  profits of Tata Power Co.,  subject  to  a minimum whether any profits were made or not.  Later on  two persons D and S advanced funds to Tata Power Company on  the condition  that in addition to the interest payable to  them by Tata Power Company they should each receive from Tatasons Ltd.,  12  1.2% of the commission earned  by  Tatasons  Ltd. Tatasons  Ltd. assigned their entire right to  the  assessee company and the Tata Power Company entered into a new agency agreement with the assessee company and the assessee company received  a commission and out of that paid 1/4 to D and  S. Relying  on  Pondicherry Railway case (2)  the  Bombay  High Court  held  that  that was not an  allowable  deduction  as expenditure incurred solely for earning profits.  On  appeal the Privy Council held that Pondicherry case did not  govern the case.  The nature of the transaction was held to be this

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

that  the obligation to make the payments was undertaken  by the assessee company in consideration of its acquisition  of the  right to property to earn profits i.e. of the right  to conduct  the business and not for the purpose  of  producing profits  in  the  conduct of  the  business.   Dealing  with Pondicherry Railway case (2) Lord Macmillan said:-               "In  the Pondicherry case the  assessees  were               under obligation to make over a share of their               profits to the French Government.  Profits had               first to be earned and ascertained before  any               sharing  took place.  Here the  obligation  of               the appellants to pay (1) [1937] L. R. 64 I.A. 215. (2) (1931) L.R. 58 I.A. 239. 368               a quarter of the commission which they receive               from the Tata Power Co. Ltd. to F. E.  Dinshaw               Ltd.,    and    Richard.     Tilden    Smith’s               administrators is quite independent of whether               the appellants make any profits or not."               and at page 225 Lord Macmillan said:-               "In  short,  the  obligation  to  make   these               payments  was undertaken by the appellants  in               consideration  of  their  acquisition  of  the               right  and opportunity to earn  profits,  that               is, of the right to conduct the business,  and               not  for the purpose of producing  profits  in               the conduct of the business." At  page 226 the Privy Council accepted the  following  test laid  down  by  Lord  President  in  Robert  Addie  &  Sons’ Collieries,  Ltd.  v. Commissioners of  Inland  Revenue  (1) where it is observed:-               "What  is ’money wholly and  exclusively  laid               out  for  the  purposes of  the  trade’  is  a               question  which  must be determined  upon  the               principles of ordinary commercial trading.  It               is  necessary, accordingly, to attend  to  the               true  nature  of the expenditure, and  to  ask               oneself the question, Is it a part of the Com-               pany’s  working  expenses; is  it  expenditure               laid  out  as part of the  process  of  profit               earning". In  Commissioner  of Income-tax, Bombay Presidency  v.  Tata Sons Ltd. (2) the company received a commission on the basis of profits.  The managed company was in urgent need of money and the assessee company found a financier a Mr. Dinshaw and an  agreement was entered into with the managed company  and Mr.  Dinshaw by which the latter agreed to lend a  crore  of rupees  on the condition that the assessee company  assigned to him a share in the commission which the assessee  company might receive from the managed company.  That was held to be an  agreement on the part of the assessee company  to  share their  commission with Mr. Dinshaw and it was a part of  the arrangement  on which the assessee company obtained  finance and therefore the payment to Mr. Dinshaw was an  expenditure solely  for the purpose of earning profits or gains  and  it was not of a capital nature.  At (1) (1924) S.C. 231. (2) (1939) 7 I.T.R. 195. 369 page  203 Beaumont C.J. said that the question  whether  the payment of a part of the commission to a third person can be regarded  as expenditure incurred solely for the purpose  of earning that commission is a question which must be answered on the facts of each case on a commercial basis.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

In The Indian Radio and Cable Communications Company Ltd. v. The  Commissioner of Income-tax, Bombay (1) it was  observed that  it was not universally true to say that a payment  the making  of  which  is conditional on  profits  being  earned cannot properly be described as an expenditure incurred  for the  purpose  of  earning such  profits.   Lord  Maugham  in explaining the judgment in the Pondicherry Railway case  (2) said at page 278:-               "  To avoid misconception it is proper to  say               that  in coming to this conclusion  they  have               not  taken the view that the case is  governed               by  the  decision in Pondicherry  Railway  Co.               Ltd.  v. Commissioner of  Income-tax,  Madras,               though  that case no doubt shows light on  the               nature  of the problem which has to be  solved               in  the  present case.  It should  perhaps  be               added that a sentence in the judgment in  that               case  has been explained, if  explanation  was               necessary, by Lord Macmillan in the subsequent               case of W. H. E. Adamson v. Union Cold Storage               Company." As  to when a deduction is claimable and when it is not,  it was said at page 277 that if a company had made an  apparent net  profit  and  then  had  to  pay  to  a  director  as  a contractual   recompense,  the  net  profit  would  be   the difference  between the two but if there was a  contract  to pay  a  commission on the net profits of the  year  it  must necessarily  be  held  to mean as  net  profits  before  the deduction of the commission. In  British  Sugar  Manufacturers Ltd.  v.  Harris  (3)  the assessee company agreed to pay two other companies a certain percentage of its annual profits after deduction of expenses and  debenture interest in consideration of their giving  to the assessee company the full benefit of their technical and financial knowledge (1) [1937] 5 I.T. R. 270.  (2) [1931] L.R. 58 I.A. 239. (3)  [1937] 21 T.C. 528 47 370 and experience.  Certain payments were made in pursuance  of that  agreement  and  it was held that  payments  under  the agreement  were  permissible  deductions  in  computing  the assessee  company’s profits.  Dealing with  the  Pondicherry Railway  case,  (1) at page 548, the learned Master  of  the Rolls said:-               " It is to be observed that Lord Macmillan  in               that  paragraph  was quite clearly  using  the               word  I  profit’ in one sense  and  one  sense               only;  he was using it’ in the sense of the  I               real   net  profit’  to  which  Lord   Maugham               referred.  That he was doing that is, I think,               abundantly  clear  when  the  nature  of   the               contract  there  in  question  is  considered,               which  was  merely a contract  under  which  a               percentage  of  profits  was  payable  by  the               railway  company  to  the  French  Government.               There was no question of services or  anything               of that kind in the case; it was merely a  sum               payable out of profits.  I do not find  myself               constrained  by  that expression  of  opinion,               because it must be read; as Lord Macmillan has               said  in a subsequent case Union Cold  Storage               Co.  Ltd.  v. Adamson (2 ) at  pp.  331-2,  in               relation to the particular subject matter with               which he was dealing."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

As has been said above the question to be considered in this case  is  governed  by the observations  of  this  Court  in Commissioner of Income-tax v. Chandulal Keshavlal & Co.  (3) and  the circumstances under which the trust agreed to  lend the  appellant  such  a large sum of money  shows  the  true nature  of  the  transaction.  On the facts  proved  in  the present case the Trust agreed to finance the business of the appellant on the terms set out in the agreement and there is nothing  to  show  that  he  could  have  made  any   better arrangements  or would not have lost the contract if he  had failed to enter into the agreement i.e. the agreement to pay the amounts in dispute.  Therefore in a commercial sense the payments were an expenditure wholly and exclusively laid out for the purpose of the business. In  our opinion, therefore, the High Court was in error  and the question referred should have been (1)  [1931] L.R. 58 I.A. 239.  (2) (1931) 16 T.C. 293,  331- 32. (3)  [1960] 38 I.T.R. 601. 371 answered in the affirmative in favour of the appellant.  The appeals  are,  therefore,  allowed and  the  judgments,  and orders of the High Court are set aside.  The appellant  will have  his  costs in this Court and in the High  Court.   One hearing fee. Appeals allowed.