1984 (3) TMI 212

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....irm and he gave them guidance in this respect. It is argued by the assessee that he had to incur expenses on behalf of the firm which he claimed out of his share income. The AAC did not allow any of the expenses claimed and his finding was that the expenses should have been claimed in the books of the firm and that the same cannot be allowed out of the share income of the assessee from the firm. The assessee has argued that it was highly unjust to tax the income but not to allow the expenses incurred to earn the income. The departmental representative argued that the expenses pertained to the business of the firm were correctly not allowed in the hands of the assessee. 2. The assessee has relied upon the following case laws--Jugal Kishor....

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....amounts paid as salary and bonus to staff, expenses for maintenance and depreciation of motor cars and travelling expenses expended by him in earning the income from the firms ". Thus, their Lordships of the Supreme Court have held that a partner who incurs expenses for the purpose of business of the firm was entitled to deduction from his share of the profits of the firm the expenses so incurred. In the book of the learned authors Kanga and Palkhivala's Law and Practice of Income-tax, 7th edition, volume 1, it is mentioned as under : " Deductions allowable to partner from his share of profits of firm--Normal expenses of the firm, e.g., salaries paid for services rendered to the firm, should be claimed in the firm's own assessment and....

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.... capital borrowed for investment in firm)". 5. Thus, according to the clear verdict of their Lordships of the Supreme Court and the opinion of the learned authors quoted above, the expenses incurred on behalf of the firm by a partner have to be allowed as deduction out of the share income. We do not agree with the finding of the AAC that the expenses cannot be allowed in the hands of the assessee and these should have been claimed in the hands of the firm. In fact, the share income computed by the ITO/AAC is inclusive of the allowances that the assessee has received from the firm for the rent of the house and for incurring various expenses on behalf of the firm. Thus, the share income is inclusive of all those amounts which the assessee ....