Deductibility of assistant's payment from partnership share income allowed where expenditure was wholly and exclusively incurred to earn income.

A partner's share of partnership profits is business income, and expenditure incurred wholly and exclusively to earn that share may be deductible. Payment made by the partner to an assistant was treated as real and supported by a bona fide arrangement for assistance in carrying out work for the firm. The relevant test was commercial necessity and nexus with earning the share income, not whether the revenue considered the payment prudent. On the facts, the partner's infirm health, the nature of the work, and the assistance actually rendered justified the arrangement, so the deduction was allowable and the disallowance was not justified.

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Issues: Whether the amount paid by a partner to an assistant from his share of partnership profits was deductible as expenditure incurred for earning the partner's share income.

Analysis: The payment to the assistant was real, made under a bona fide arrangement, and was shown to have been for assistance in carrying out the assessee's work in the firm. The relevant test was not whether the payment was prudent in the view of the revenue, but whether it was incurred wholly and exclusively for earning the share income. A partner's share is business income, and expenditure necessary to earn that income is deductible. On the facts, the assessee's infirm health, the nature of the work, and the assistance actually rendered by the employee supported the commercial necessity of the arrangement.

Conclusion: The deduction was allowable and the disallowance was not justified.

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