1963 (10) TMI 44

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..... 8377; 19,380 in the second year. Both these amounts of expenses included items of interest of ₹ 1,935 in the first year and ₹ 1,956 in the second year. These amounts of interest were paid by the assessee to the bank named Virjee and Company from which the assessee had borrowed money to finance the partnership firms. With the exception of these items of interest the Income-tax Officer disallowed the other expenses. The order of the Income-tax Officer was affirmed by the Appellate Assistant Commissioner in appeal. The assessee took the matter in second appeal before the Income-tax Appellate Tribunal which held that the profits and gains earned from a partnership were to be taxed as business income in the hands of the assessee who .....

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..... hkaran v. Commissioner of Income-tax (Income-tax Reference No. 38 of 1952, decided on 2nd June, 1953). With great respect to the Calcutta High Court, we are unable to accept the proposition of law laid down in Income-tax Reference No. 38 of 1952 as correct. It is not correct as a general legal proposition to state that a partner of a registered firm is not entitled to claim any deduction against the share of the profits included in his total income, the share having been arrived at on the assessment of the firm with regard to its profits. It would be open to the partner in a proper case to claim a deduction provided he satisfies the taxing authority that such deduction represents a necessary expenditure, the expenditure being incurred in o .....

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..... me-tax [1959] 37 ITR 528 . In view of the principle laid down by these authorities we are of opinion that the Income-tax Appellate Tribunal has taken the correct view of the law in this case in holding that the assessee was entitled to have the expenditure incurred by him in earning his income from the firms allowed in his personal assessment and remanding the matter to the Income-tax Officer for examining the nature of the expenses in order to find out how far those expenses are allowable. For these reasons we hold that the question of law referred to the High Court by the Income-tax Appellate Tribunal must be answered in favour of the assessee and against the department. The assessee is entitled to the costs of the reference. Hearing .....

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