Partner's share of firm profits as business income supports deduction of commercially expedient expenses and depreciation.

A partner's share of firm profits is business income in his hands, and expenses incurred on grounds of commercial expediency to earn that income are deductible. The discussion states that motor car, entertainment, studio, books and related expenses, together with depreciation on the motor car, were connected with the assessee's architectural practice and were agreed to be borne by the partners. Their absence from the firm's accounts did not justify disallowance. The Tribunal's rejection of the deductions on the footing that they were not incurred for earning the partner's share of profits was therefore incorrect, and the claim was treated as allowable.

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Issues: Whether a partner is entitled, in computing his share of income from a firm, to deduct motor car expenses, entertainment expenses, studio expenses, books and other expenses, and depreciation on the motor car, when the expenditure is claimed to have been incurred for the business of the firm and for earning the partner's share of profits.

Analysis: The share of a partner in the profits of a firm is business income in his hands. Expenditure laid out on grounds of commercial expediency for earning that income is deductible, and for the years governed by the earlier Act the claim falls within the corresponding business deduction provision, while for the later years the general principles of commercial accounting apply. The materials showed that the expenses were connected with the assessee's architectural practice and were agreed to be borne by the partners, so the fact that the items did not appear in the firm's accounts did not justify disallowance. The rejection by treating the expenditure as not incurred for earning the partner's share of profits was incorrect.

Conclusion: The Tribunal was wrong in rejecting the deductions, and the claim was rightly allowable in favour of the assessee.

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