Horace Owen Compton Beasley, Kt., C.J.

1. The petitioners here, a limited company registered under the Indian Companies Act, carrying on business in the manufacture and sale of the "Minsararasam," a patent medicine, claimed a deduction from their income in the year of account of a sum of Rs. 13,000 odd as a lawfully deductible item. They claimed to deduct that sum under Section 10(2)(ix) of the Indian Income Tax Act as being expenditure incurred solely for the purpose of earning profits or gains. It appears that one Dr. Varadarajulu Naidu had invented this patent medicine or at any rate was the owner of its secret; and on the 29th March, 1923, the petitioners entered into an agreement with Dr. Varadarajulu Naidu for the purchase by them and for the sale by him of all rights and privileges of manufacturing, selling and generally dealing in Minsararasam and covenanted that, if they successfully promoted the company, Dr. Varadarajulu Naidu should sell to them all such rights and privileges for manufacturing, selling and generally dealing in the medicine subject to the following conditions - it is necessary to set out only two of them:

(1) That the parties of the first part pay t