Partner's business-use car expenses are deductible against partnership income when actual use is proved

A partner's share of profits from a firm is business income in the partner's hands, and expenses incurred wholly and exclusively to earn that income are deductible. On proof of actual business use of the car for partnership-related travel and disbursements, the related petrol cost and proportionate depreciation were allowable, while unproved or excess claim was not. The ruling recognises deduction of car expenses linked to earning partnership income only to the extent business use is established.

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Issues: Whether the assessee was entitled to deduct petrol expenditure and depreciation on a car used in connection with earning his share of profits from partnership business.

Analysis: The share of profits received by a partner from a firm is business income in the partner's hands, and expenditure incurred wholly and exclusively for earning that income is deductible. Applying that principle, the assessee established actual use of the car for partnership business, including travel between the firm's places of business and for business-related disbursements. The expenditure was therefore connected with earning the partnership income, though only the proved petrol expenditure and proportionate depreciation could be allowed.

Conclusion: The assessee was entitled to deduction of Rs. 2,000 towards petrol expenditure and 50% of the depreciation on the car.

Ratio Decidendi: A partner may deduct from partnership income expenditure actually and wholly incurred exclusively for earning that income, including proportionate car expenses and depreciation where business use is proved.

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