THE COMMISSIONER OF EXCESSPROFITS TAX, MADRAS vs N. M. RAYALOO IYER & SONS.

The Supreme Court ruled that under Section 10(2)(x) of the Income-tax Act and Section 19 of the Excess Profits Tax Act, the remuneration paid to a managing agent and the commission to branch managers must be reasonable and necessary for the business. The Court held that the Excess Profits Tax should not be deducted when calculating net profits for the purpose of determining permissible deductions. The High Court's decision to allow certain deductions was upheld, affirming that the test of reasonableness should be viewed from a business perspective.