Partner's expenditure to earn partnership income is deductible when incurred on commercial expediency and supported by proof.

A partner's share of partnership income is business income, and a partner is not barred in law from claiming deduction of expenditure incurred to earn that income. Tax under section 10 is confined to real profits, so amounts laid out on commercial expediency and shown to be necessary for earning the partnership share may be deducted under section 10(2)(xv) or the general principle applied to business income. The deduction was upheld, subject to proof that the claimed items were in fact incurred for earning the partnership income.

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Issues: Whether a partner who has no independent business of his own can claim deduction of expenditure incurred in earning his share of partnership income.

Analysis: Income derived by a partner from his share in partnership business is business income within the ambit of section 10(1) of the Income-tax Act. The true profits and gains taxable under that provision must be ascertained on commercial principles, and a partner is not barred as a matter of law from claiming deduction of expenditure incurred to earn such income. Where the expenditure is shown to be necessary and incurred on grounds of commercial expediency for earning the partnership profits, it is allowable under section 10(2)(xv) or under the general principle that only real profits are taxable.

Conclusion: The expenditure incurred by the assessee in earning income from the firms was allowable in law, subject to proof that the items claimed were laid out for earning the income.

Final Conclusion: The question referred was answered in favour of the assessee, and the claim for deduction of qualifying expenditure was upheld.

Ratio Decidendi: A partner's share of partnership income, being business income, is deductible for expenditure necessarily incurred on commercial expediency to earn that income, because taxation under section 10 is confined to real profits and gains.

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