1967 (7) TMI 11 - HC - Income Tax

Business Expenditure - Held that expenditure of Rs. 6,024 incurred by the assessee on a car which was used by him for the business of the firm is an allowable deduction against the assessee s share income from the firm of M/s. D & Bros.

Summary

Issues:
Claim of motor-car expenses as deductible expenditure in individual assessment against share income from partnership firm.

Analysis:
The judgment involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the allowance of motor-car expenses amounting to Rs. 6,024 claimed by an individual assessee against his share income from a partnership firm. The assessee, a managing partner in the firm, contended that the expenses were incurred for the business of the firm. The dispute arose as the revenue authorities disallowed the deduction, arguing that the expenses were personal and not incurred wholly and exclusively for business purposes. The Tribunal found that the expenses were indeed for the business of the firm, leading to the High Court's analysis. The Court examined the provisions of section 37 of the Act, which allows expenditure wholly and exclusively for business purposes. The Court emphasized the burden on the assessee to prove the expenses were incurred for business. The revenue contended that the burden was not discharged, but the Court noted that this argument was not raised earlier, and the Tribunal's factual finding supported the business purpose of the expenses.

The Court further discussed the commercial aspect of partner expenses for the firm's business. Referring to precedent, the Court highlighted that the real income of the partner should be considered, focusing on the commercial perspective. In this case, the managing partner's expenses for the partnership firm's business were found to be allowable deductions against his income from the firm. Despite the nil share income in the relevant year, the Court held that the expenses were incurred wholly and exclusively for business purposes. The Court concluded that the expenses were allowable deductions against the assessee's income from the partnership firm, answering the referred question in the affirmative. The judgment clarified that the decision was based on the specific facts and circumstances of the case, and the Commissioner was directed to pay the costs of the reference to the assessee.