Business salary deduction for accounting support upheld where expenditure served administration and accounts work

Salary paid to an accountant and correspondence clerk for assisting business administration and maintaining accounts was treated as an admissible business deduction where the expenditure was incurred wholly and exclusively for business purposes. The text notes that an assessee's share of partnership income could support incidental expenditure of this kind, and that the principle recognised under the Income-tax Act, 1922 remained relevant under the later Act. Section 67(3) was considered not exhaustive, so a deduction otherwise allowable under section 37(1) could still be claimed where the facts justified it. Harmonious construction was applied to give effect to both provisions, and the expenditure was allowed.

---

---

Issues: Whether the salary paid to the accountant and correspondence clerk for assisting in business administration and maintenance of accounts was an admissible business deduction.

Analysis: The allowance depended on whether the expenditure was incurred wholly and exclusively for the purposes of the business and whether the assessee's share of partnership income could be treated as business income for which such incidental expenditure was deductible. The Court noted that under the Income-tax Act, 1922 such expenditure had been recognised as deductible, and held that the later Act did not abrogate that principle. Section 67(3) was treated as not exhaustive, so a deduction otherwise allowable under section 37(1) remained available where the facts supported it. The principle of harmonious construction was applied to give effect both to the special deduction provision and the general deduction provision.

Conclusion: The expenditure was an admissible deduction and the question was answered in the affirmative, in favour of the assessee.

---