1979 (1) TMI 161 - AT - Income Tax

Summary

Issues:
- Allowability of motor car maintenance and running expenditure against share income
- Disallowance of expenses for personal nature
- Interpretation of expenditure for earning share income
- Applicability of principles from relevant court decisions

Analysis:
The appeal in this case pertains to the assessment year 1976-77, where the assessee, an individual partner in two firms, claimed a deduction of Rs. 17,034 against the share income for motor car maintenance and running expenditure of Rs. 22,712. The Income Tax Officer (ITO) allowed only Rs. 3,000, citing lack of evidence for the expenses being incurred for earning the share income.

Upon appeal, the Appellate Assistant Commissioner (AAC) acknowledged that motor car expenses could be admissible against share income if incurred for business purposes. However, the AAC allowed only an additional Rs. 500, stating that expenses for travel between business and residence were not deductible.

During the appeal hearing, the Departmental Representative argued that the expenses were not for earning share income but for attending to the firm's business, suggesting that any deduction should be in the hands of the firm, not the assessee. Reference was made to a decision of the Madras High Court in a similar case.

The Tribunal analyzed the expenditure breakdown, noting significant amounts for petrol, repairs, and interest on over-drawings. Referring to relevant court decisions, including one by the Supreme Court, the Tribunal emphasized that share income is considered business income and allowable deductions should be made for expenses necessary to earn that income.

Ultimately, the Tribunal held that the expenditure was indeed incurred for earning share income, as evidenced by the nature of the expenses and the assessee's role in maximizing the firm's profits. The Tribunal found the 1/4th disallowance by the assessee to be sufficient and allowed the full deduction of Rs. 17,034. The Income Tax Officer was directed to modify the assessment accordingly, and the appeal was allowed.