Law: Income Tax Act, 1922

Section: 10

Income-tax Act (XI of 1922)----S. 10--Business allowances--Where a partner in a firm earns profits out of the business of the firm and in his individual assessment claims any expenditure incurred in earning that profit, he is entitled to such 'deduction in respect of his own business--If a partner is able to establish that expenditure claimed by him was incurred wholly and exclusively for the purpose of his business and was spent in view of commercial expediency to earn the share of his profit from the firm, he would be entitled to claim deduction of such -exposes under S.10(2)(xv). Shantikumar Narottam Moovajce v. C.I.T., Bombay City (1955) 27 I T R 69; Commissioner of Income-tax v. Ramniklal Kothari (1969) 74 1 T R 57; Commissioner of Income-tax, Bombay City v. K.R. Irani (1963) 48 IT, R 525 and Feroz H. Kundianawala v. Commissioner of Income-tax (1978) 113 I T R 873 ref. JUDGMENT SALEEM AKHTAR, J.--The applicant is a private limited company. It is a partner in, a registered firm styled as M/s. Bridge Stock Co., During the assessment years 1971-72 and 1972-73 the applicant claimed expenses under the head salaries, general charges-and professional charges etc. against its share income received from the firm. It was pleaded that the applicant being a juristic person carries on its business through its employees and therefore, any amount spent on that account was a permissible deduction under section 10 of the Income Tax Act. This contention was not accepted by the Assessing Officer and even the Tribunal repelled the same. The Tribunal was of the view that the applicant is a partner in a firm which carries on business and its profits are determined after deducting all expenses incurred for earning profs from the business and the partners have not to do anything or to incurred' any, expenses for earning that profit. It was further observed that expenses incurred after the profit has been struck cannot be said to have been incurred for the purposes of business. On application made by the applicant the following question has been referred to the High Court:- "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that…

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