1997 (3) TMI 134

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.... accounting year relevant to the assessment year 1991-92, assessee-firm claimed deduction of a sum of Rs. 30,438 referable to the medical expenses incurred in connection with treatment of the managing partner. The aforesaid expenditure was incurred for purchase of Pace Maker. Assessing Officer was of the opinion that the expenditure is exclusively personal in nature and not related to the business. He thus disallowed the claim. 3. Aggrieved, assessee contended before the first appellate authority that there is no bar in allowing such expenditure either under section 40(b) or under section 37 of the Act. He further submitted that the managing partner, being the founder partner, protection of his life was necessary in order to protect and pr....

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....e on medical treatment of the managing partner was necessary in the interests of business as he was the live-wire of the business and hence the expenditure can be said to be wholly and exclusively spent for the purpose of business of the assessee-firm and allowable u/s. 37 of the Act. Ld. counsel supplied figures of total income in respect of the subsequent assessment years to show that the turnover and the profit increased from year to year due to the efforts of the managing partner, who is well-conversant in the business. 5. On the other hand, ld. departmental representative submitted that the expenditure is primarily a personal expenditure of a partner which is not allowable under section 37 of the Act. He further submitted that the exp....

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....s case also does not directly apply to the facts of the instant case. No doubt, certain observations of the Court in the aforesaid two cases were pointed out by the ld. counsel to show that payment made to the partner, for letting out the immovable property owned by him in individual capacity, is not hit by the provisions of section 10(4) of the old Act, section 40(b) of the 1961 Act, but as could be seen from the assessment order, in the instant case, the tax authorities have not invoked the provisions of section 40(b). Thus, the argument advanced by the ld. counsel for the assessee that the payment made by the firm for purchase of Pace Maker is not hit by section 40(b) is not in dispute. However, in order to allow a deduction, in respect ....

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....or the purpose of profession. Similar view was taken by the Bombay Bench of the Tribunal in the case reported in Dhimant Thakkar v. Fifth ITO [1994] 51 ITD 578 wherein it was observed that if the expenditure can be attributed to both the purposes, i.e., professional as well as personal, then it cannot be allowed under section 37. It was further observed therein that expenditure on medical treatment of eyes had an element of personal expenditure and hence could not be allowed as business expenditure under section 37(1) of the Act. In our opinion, the aforesaid two decisions of the Tribunal directly cover the issue. It may not be out of place to observe that Sri P. Raichowdhury, managing partner, has 60% share in the business and another 30% ....