1980 (6) TMI 27 - HC - Income Tax

Summary

Issues:
1. Deduction of house rent paid by the assessee against share income from the firm under section 38 of the Income-tax Act, 1961.

Analysis:
The case involved a question regarding the deduction of Rs. 700, being a part of the house rent paid by the assessee against his share income from the firm under section 38 of the Income-tax Act, 1961 for the assessment year 1971-72. The assessee, a partner in a firm of chartered accountants, claimed the deduction of Rs. 700 under section 38(1) for the use of a part of the dwelling house. Additionally, the assessee also claimed Rs. 2,400 out of the part of car expenses under section 37(1) for earning his share income from the firm. The Income Tax Officer (ITO) disallowed the claim without providing any reason.

Upon appeal, the Appellate Assistant Commissioner (AAC) accepted the assessee's contention that the expenditure was incurred for the business of the firm and directed the ITO to allow the deductions claimed by the assessee. Subsequently, the Tribunal upheld the AAC's decision, rejecting the revenue's appeal. The Tribunal considered previous decisions where partners of the firm were allowed similar deductions for expenses incurred in facilitating the firm's business, such as consultations at the partner's residence and conveyance expenses.

The Tribunal's decision was based on the principle that partners are entitled to deductions allowable under the Income-tax Act in order to earn income as a partner of a firm. The Tribunal referenced various legal precedents, including decisions by the Supreme Court and High Courts, to support the view that the deductions claimed by the assessee were valid. The Tribunal emphasized that the estimates for deductions were not challenged and were in line with legal principles established in previous cases.

Consequently, the High Court answered the question in the affirmative and in favor of the assessee, affirming the Tribunal's decision. Each party was ordered to pay and bear its own costs. Judge Sudhindra Mohan Guha concurred with the judgment delivered by Judge Sabyasachi Mukherjee.