Summary
The respondent was carrying on business in diverse lines as a partner in four different firms. For the assessment years 1955-56 and 1956-57 he declared his share of profits from the four firms and claimed deductions made up of salary and bonus to staff, expenses for maintenance and depreciation of motor-car, travelling expenses and interest. The Incometax Officer and the Appellate Assistant Commissioner allowed only the claim for interest as a permissible deduction. The Tribunal set aside the orders and remanded the cases for the two years for an examination of the nature of expenditure claimed to have been incurred by the respondent, as, in its view, deductions admissible under s. 10(2) of the Incometax Act, 1922 were allowable in computing the taxable income of the respondent. On the question, whether expenses incurred by the respondent (who was not carrying on any independent business of his own), in earning income from the various firms in which he was a partner, were allowable in law as deductions, the High Court held in favour of the respondent.
In appeal to this Court,HELD : Section 23 (5) (a) (ii) of the Income-tax Act, 1922 provides that the share of the partner in the profits and gains of a registered firm shall be included in the total income of the partner. The share so received by the partner is 'profits and gains of business' carried on by him and is on that account liable to be computed under s. 10. The receipt being business income for the purpose of s. 10(1) expenditure necessary for the purpose of earning that income and allowances appropriate under s. 10(2) are deductible therefrom in determining the taxable income of the partner.The facts that in computing the total profits of the partnership allowances admissible to the partnership in the computation of its profits and gains were taken into account, in the manner provided by s. 10, or that s.16(1)(b) requires that salary, interest, commission or other remuneration payable by the firm besides the share in the balance of profit is to be taken into account, do not imply that in determining the taxable income of the partner, expenditure incurred by the partner in earning the profits, salary, interest. commission or other remuneration is not to be allowed. [862 C.H]Shantikumar Narottam Morarji v. Commissioner of Income-tax, Bombay City, 27 I.T.R. 69, Jitmal Bhuramal v. Commissioner of Incometax, Bihar & Orissa, 37 I.T.R. 528 and Basantlal Gupta v. Commissioner of lncome-tax, Madras, 50 I.T.R. 541, approved.M/s. Iswardas Subhkaran v. Commissioner of Income-tax West Bengal, Income-tax Reference No. 38 of 1952 dated June 2, 1953, of the Calcutta High Court, disapproved.861See the full content of this document
Extract
Commissioner Of Income-tax, Bihar VS. Ramniklal Kothari
PETITIONER: COMMISSIONER OF INCOME-TAX, BIHAR Vs.RESPONDENT: RAMNIKLAL KOTHARIDATE OF JUDGMENT: 07/03/1969BENCH: SHAH, J.C.BENCH: SHAH, J.C.GROVER, A.N.CITATION: 1969 AIR 862 1969 SCR (3) 860 1969 SCC (1) 757ACT: Income-tax Act (11 of 1922), ss. 10(1) & (2), 16(1)(b) and 23(5) (a)(ii) Partnership carrying on business-Partner's where determined Partner if further entitled to deductions under s. 10(2).JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 575 and 576 o...
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