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TMI Blog1974 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee paid a sum of Rs. 7,568 to Laxmi Narain under the agreement dated April 1, 1960, and the assessee claimed deduction of this amount in computing his own share of income from the firm. The Income-tax officer rejected the assessee's claim on the following grounds, namely : (i) that the agreement dated April 1, 1960, was not a genuine agreement ; (ii) that Shri Laxmi Narain did not render any services to the assessee but rendered services only to the firm, as he was already an employee of the firm in charge of the sales section ; and (iii) that the amount in question was in the nature of a disposition of income by the assessee after it had accrued to him. The assessee preferred an appeal to the Appellate Assistant Commissioner. The latter disagreed with the view of the Income-tax Officer that the agreement between the assessee and Shri Laxmi Narain was not a genuine agreement. After examination of the evidence led before him, he was satisfied that services were in fact rendered by Shri Laxmi Narain to the assessee, that remuneration was in fact paid by the assessee to Shri Laxmi Narain in lieu of such services and that the agreement between the assessee and Shri Lax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to perform any duties in relation to the business of the firm. The partnership agreement was not placed before the department and what was stated by the assessee before the department and the Tribunal and even urged before the High Court was that the assessee had to have a man of his own to look after his interests. The High Court understood this to mean that the assessee did not have any confidence in the partner who was actually in management and had need to see that things were not done which would react to his disadvantage and, for that purpose, he claimed to have employed his nephew. The High Court also took note of the fact that Shri Gupta made a statement in the letter addressed to the Income-tax Officer to the effect that he was working at General Swadeshis as a representative of the assessee and that he was not paid any salary or remuneration by the firm. According to this letter, Shri Gupta was in charge of the keys of the shop and the safe. He was employed in making purchases for the shop in the wholesale market, in checking the incoming goods and supervising the work of the salesman and other workers of the shop and checking the credit facilities granted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner is profits and gains of business' carried on by him and is on that account liable to be computed under section 10, and it is a matter of no moment that the total profits of the partnership were computed in the manner provided by section 10 of the Income-tax Act and allowances admissible to the partnership in the computation of the profits and gains were taken into account. Income of the partnership carrying on business is computed as business income. The share of the partner in the taxable profits of the registered firms liable to be included under section 23(5)(a)(ii) in his total income is still received as income from business carried on by him. Counsel for the Commissioner accepted, and in our judgment counsel was right in so doing, that the share of the respondent from the profits of the firms was income from business carried on by the partner. Business carried on by a firm is business carried on by the partners. Profits of the firm are profits earned by all the partners in carrying on the business. In the individual assessment of the partner, his share from the firm's business is liable to be taken into account under section 10(1). Being income from business, allowances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was nothing in section, 67(3) to indicate that that provision was exhaustive and that deductions other than those mentioned therein could not be allowed to a partner and that if a deduction was admissible in respect of a partner's share in the income of the firm under section 37 of the Act, it would have to be allowed even though it may not fall within the ambit of section 67(3) of the Act. We are now left with the last contention of the learned counsel that the expenditure in question amounts to an application of the assessee's profits after they had accrued to him. In support of this contention, the learned counsel has referred to a decision of the Supreme Court in Commissioner of Income-tax v. Sitaldas Tirathdas. In that case, there was a decree of a court under which the assessee was under a legal obligation to pay certain amounts to his wife and children by way of maintenance and marriage expenses and the assessee claimed deduction of the amount paid by him under the said decree in computing his business income. The assessee's claim was rejected and it was held that this was a case in which the wife and children of the assessee received a portion of the assessee's income a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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