Deduction for partnership income expenses allowed where partner's share is treated as business income and expenditure is necessary to earn it.

A partner's share of profits from a firm is treated as business income, and expenditure incurred wholly and exclusively to earn that income is deductible in computing taxable income. The fact that the partner's share is included in total income under the provisions relating to registered firms does not bar deduction of otherwise allowable business expenses. The deduction remains available only where the expenditure is shown to be necessary and incurred for the purpose of earning the partnership income.

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Issues: Whether a partner who does not carry on an independent business can claim deductions for expenditure incurred in earning his share of profits from partnership firms.

Analysis: A partner's share in the profits of a firm is income from business carried on by him and is assessable under the provisions governing business income. Once the share is treated as business income, expenditure incurred wholly and exclusively for earning that income, and other appropriate allowances, are deductible in computing the partner's taxable income. The inclusion of the partner's share in the total income under the relevant provisions dealing with registered firms does not exclude deduction of properly allowable business expenditure. The claimed deduction must, however, be shown to be necessary expenditure incurred for the purpose of earning the income.

Conclusion: The expenses incurred by the assessee in earning his share of partnership income were allowable in law as deductions. The answer was in favour of the assessee.

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