1931 (2) TMI 15

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....6(2), Income Tax Act. The firm in question consists of five partners two of whom are Government officials, who along with another are sleeping partners, while the remaining two work as managing and assistant managing partners respectively. In the year 1923-1921 the two last-named received salaries of Rs. 135 and Rs. 110 per mensem respectively. It was then claimed that these salaries should be ded....

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....of the partners as a business deduction does not operate as res judicata especially when no fresh facts justifying the reopening of the question of partners' salaries have been put forth and proved by the assessing authority. 2. Whether the salaries charged by the working partners 1 and 2 are not legal expenses incurred for the purposes of earning profits within the meaning of Section....

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.... in that capacity might render services to the firm in consideration of which the firm might pay him a remuneration which would be a legitimate deduction from the assessable income of the firm. But obviously considering the opportunities for fraud that any such alleged arrangement would offer, very strict proof would reasonably be required of the existence of such an arrangement. 5. The learned....

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....e of profits and over and above their share of profits, the salaries could be allowed as a deduction. The dual capacity of a partner cum employee, though, suspect, is 'possible and to the extent that the person is in truth an employee the salary is deductible from the profits of the partnership. 8. My answer to question 2 would be as given above and with that statement of the law it remains....