Partner's business car expenses deductible against share income, even when the partner's share income is nil.

Expenditure incurred by a partner on a motor car used wholly and exclusively for the partnership firm's business was held deductible in the partner's own assessment under section 37 of the Income-tax Act, 1961. The decisive factual finding was that the car expenses were business expenses of the firm and not personal expenditure. The partner's nil share income for the year did not change the character of the outlay or defeat the deduction. Reimbursement arrangements between the partners were treated as immaterial to the deductibility question, which was answered in favour of allowing the claim.

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Issues: Whether expenditure incurred by a partner on a motor-car used for the business of the partnership firm is allowable as a deduction against the partner's share income from the firm.

Analysis: The relevant assessment year fell under the Income-tax Act, 1961, and section 37 applied to expenditure laid out wholly and exclusively for the purposes of business. The finding of fact recorded below was that the car expenses were in truth incurred for the business of the firm and not as personal expenses. The fact that the assessee's share of income from the firm was nil in the relevant year did not alter the character of the expenditure. The deduction was examined on the footing of the assessee's business income, and the commercial arrangement between partners as to reimbursement was held to be immaterial to the legal question whether the expense was deductible in the assessee's assessment.

Conclusion: The expenditure was allowable as a deduction against the assessee's share income from the firm, and the answer was in favour of the assessee.

Ratio Decidendi: Expenditure incurred by a partner wholly and exclusively for the business of a partnership firm is deductible in the partner's own assessment against share income from the firm, even if the partner's share income for the year is nil.

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