Apportionment of receiver-manager salary allowed where part of the work relates to taxable estate income.

Salary paid to a receiver-manager may be apportioned for deduction where only part of the work is directed to earning taxable estate income. Section 12(2) allows expenditure incurred solely for making or earning taxable income, and that relief is not denied merely because the same person also performs functions connected with exempt agricultural income. The critical point is whether a separable portion of the remuneration is attributable to the taxable-income activity; if so, that part may be deducted even though the salary also covers non-taxable functions.

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Issues: Whether any portion of the receiver-manager's salary was deductible under section 12(2) as expenditure incurred solely for the purpose of making or earning the taxable income of the estate, notwithstanding that he also performed functions connected with agricultural income which was not taxable.

Analysis: The salary of a manager or receiver need not be treated as wholly ineligible for deduction merely because the same person discharges both taxable and non-taxable functions. Section 12(2) permits allowance for expenditure incurred solely for earning the taxable income, and the fact that part of the work relates to exempt agricultural income does not prevent a proper apportionment where a separable portion of the remuneration is attributable to the income-producing taxable part of the estate. The section does not require the whole salary to be devoted exclusively to taxable income before any deduction can be made.

Conclusion: A part of the salary was deductible under section 12(2), and the assessee succeeded.

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