COMMISSIONER OF INCOME TAX Vs. BABURAM

JUDGEMENT

(1.) THE question referred to us in the present case is:

(2.) THE facts of the case show that the assessment year in question was 1959 -60. The assessee, who was a partner in the firm, Northern Steel and General Mills, had entered into an agreement with his own son, Pran Nath, by which the son was to receive a salary of Rs. 250 and certain other amounts for looking after the interests of the assessee in the firm. The reason for this agreement was that the assessee was physically not capable of rendering services, as could be expected of him, to the partnership and he had to engage somebody else to render those services. The amount which was paid to the son out of the assessee's share in the partnership business was claimed as a deduction from the taxable income. It was disallowed by the ITO on the ground that the payment was made for extra -commercial considerations. The total sum which was claimed as a deduction was Rs. 7,262. On appeal to the AAC, the entire sum was allowed. The ITO appealed to the Tribunal which came to the conclusion that there were two aspects of the payment received (to be considered): (1) the son was looking after the interests of the father in the partnership business, and (2) the son was doing something in the partnership firm on behalf of the assessee. The Tribunal had been referred to a judgment of the Madras High Court in Basantlal Gupta vs. CIT (1963) 50 ITR 541 (Mad), where a similar deduction had been completely disallowed and stated that, in their view, as there were two aspects of the payment received by the assessee's son, they would, on an estimate basis, allow half the amount. That is how the question framed and referred to us states that Rs. 3,636.50 has been deducted from the assessee's share income.

(3.) TURNING now to the question referred to us, it has been urged by learned counsel for the CIT that the Tribunal was wrong in allowing even half the amount claimed as a deduction. The contention is that the entire amount was paid to the assessee's son for rendering services to the partnership business, and, therefore, it was not an allowable deduction as far as the assessee was concerned. Reliance is placed on the judgment of the Supreme Court in Jitmal Bhuramal vs. CIT (1962) 44 ITR 887 (SC), which is a case in which an HUF was represented in a partnership through its Karta and some junior members had been engaged by the Karta to render services on behalf of the family in the partnership firm. It was held that the deduction was not allowable as services were not being rendered to the HUF but to the partnership firm in which the HUF was represented through its Karta. We find that the said judgment is not to be applied to the facts of the present case where the assessee himself was incapacitated and had to get somebody to represent him. The present case is covered by a series of other decisions including some rendered by this High Court showing that the expenses incurred by a partner in earning his income from a partnership business are allowable deductions. There are also lots of other cases in which other types of deductions have been upheld by the Courts in accordance with the partnership interest of an individual partner being treated as a business asset in his own hands. We now proceed to mention those cases wherein similar deductions have been allowed as claimed by the assessee in the present case. Those cases are: CIT vs. Ramniklal Kothari (1969)74 ITR 57 (SC), decided by the Supreme Court, CIT vs. Ganpat Rai Jaggi and Co. (1972) 86 ITR 363 (Del) and CIT vs. Sohan Lal Nayyar (1974) 95 ITR 90 (Del), decided by this High Court and CIT vs. V. Kaithan (1972) 85 ITR 14 (Mad), decided by the Madras High Court. In view of the fact that it is well settled that allowances normally allowed against business income can also be claimed against the share of a partner from a partnership business, it only remains to be seen whether, in the present case, there is a distinction between the facts of this case and the facts of the Madras case relied upon by the Tribunal.