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TMI Blog1985 (10) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... wa is having 20 per cent share in the profits of the firm and has introduced by way of capital sum of Rs. 10,000. One capital he is receiving interest at the rate of 12 per cent as per the deed of partnership and vide cl. (8) of the partnership deed he is paid Rs. 850 per month by way of salary while completing the assessment. for asst. yr. 1981-82 under s. 143(3) of the Act the ITO disallowed sum of Rs 9350 paid to a partner. This disallowance is not made on the basis of s. 40(b) of the Act and this is evidently clear as per an order under s. 158 regarding allocation of profits because in the allocation of income made by the ITO though there is separate amount in respect of interest paid to each partner is shown for the purpose of inclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dt. 23rd June 1984 submitted to the CIT (A) and stated that salary was paid to Mr. Patwa only because of his qualifications and the type of services rendered by him. Besides, his capital contribution to the firm was only Rs. 10,000 on which interest was paid. Besides, there were other partners also in the capacity of the Karta of their respective joint families and none of the partners other than Mr. Patwa was paid any salary and therefore, it was clear that Mr. Patwa had worked for the business of the firm considering the nature of the business. Reliance was placed on decision in CIT vs. Gurunath vs. Dhakappa (1969) 72 ITR 192 (SC), in the case of Prem Nath Ors. (1970) 78 ITR 319 (SC), in the case of V. J. Patel and P. J. Patel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the order of the CIT (A) on this issue is required to be set aside because he has proceeded on a wrong footing regarding relationship of salary payment and absence of record etc. It also appears that he has not considered the nature of business of the assessee firm as also the qualifications and experience possessed by Shri Patwa. Following extract from the copy of the letter submitted to the CIT by the assessee would highlight the observations made by us: "Mr. Rajen Patwa, B. E. Electronics Engineer soon after completing his research work and preparing a prototype of the electronic yarn clearers has jointed the manufacturing aspect to M/s. Patwa Kinariwala Electronics. However, since the yarn cleaners developed by him at ATIRA was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of decision in the case of Chidambaram Pillai would probably support the case of the assessee on proper thinking because the very fact that all the other partners have worked for the purpose of business of the firm and not yet paid any salary or remuneration might support the stand of the assessee that the payment under consideration has direct nexus to professional or personal qualification of Mr. Patwa and therefore, the payment was for redressing the services like those rendered the other partners, Mr. Patwa is not paid anything. One more aspect required to be considered here is the income shown by Mr. Patwa as individual income in he assessment of individual. As per the paper book the income in asst. yr. 1980-81 around Rs. 50,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and at the time of hearing, after giving reasonable opportunity to the assessee to present the case. 5. The second common ground is in respect of disallowance of Rs. 1,000 for conveyance expenses and Rs. 3,500 out of travelling expenses for asst. yr. 1981-82 and Rs. 5,000 out of travelling and conveyance expenses for asst. yr. 1982-83 5.1 The ITO made disallowance in usual way without giving reasons. On appeal, the CIT (A) dismissed the same on various grounds including non verification of amounts for taxi fare. 6. The ld. counsel for the assessee submitted necessary details month-wise in respect of conveyance expenses as also travelling expenses together with details in respect of persons visited, places visited, time taken, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses on account of the fact that whenever a partner has visited the outside place he must have spent something on person for boarding, washing charges, etc. to be considered as personal expenditure. This is so because when a person is on tour on behalf of the business of the assessee the type of expenditure becomes the expenditure on tour on behalf of the assessee and therefore, such consideration regarding personal expenditure on food, etc. are irrelevant. It is an aspect of law that is such tour is undertaken on behalf of corporate body, charges in respect of good, etc. incurred by the person undertaking the tour would be allowable deduction on the assessment of the company probably on the basis that there is no personal expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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