Mysore Fertiliser Co., Madras vs Commissioner Of Income-Tax And Excess ... on 27 August, 1956
Now, it is undoubtedly true that the work which Kevalchand was required to do under the agreement was in no way greater or more onerous than that which he was doing before, but there are, as observed by the Madras High Court in Mysore Fertiliser Co. v. Commissioner of Income-tax, 'obvious limits to the exaltation of this plea to a rigid and inflexible principle in deciding on the basis of commercial expediency of what constitutes reasonable expenditure.... .under Section 10(2)(x)'. If this argument were pushed to its logical extreme, even payment of bonus or any commission at all would have been unreasonable which the revenue authorities obviously did not so regard. Of course this circumstance would undoubtedly have some relevance but it must be considered along with other circumstances and the question whether commercial expediency justified the payment of this commission to Kevalchand must be judged in
the light of all the circumstances which existed at the time when the agreement was made. Now what were those circumstances ?