STATE OF MADRAS Vs. MOULVIE ESTATE NAGALUR

JUDGEMENT

(1.) THE question is, whether the sum of Rs. 4,200 paid out to the managing partner of the firm is deductible as an expenditure under section 5(e) of the Madras Agricultural Income-tax Act, 1955. THE firms consists of nine partners and has been during the assessment year 1963-64 a 2/9th share. In consideration of his services as managing partner of the firm, he was paid a total remuneration of Rs. 4,200 for the year. It was sought to be deducted as salary. THE departmental officers took the view that a managing partner could in no sense be described as a servant of the firm and disallowed the amount. THE Tribunal was of an expenditure wholly and exclusively laid out for the purpose of the land.

(2.) WE think the Tribunal, view is correct. The question is not whether the managing partner was a servant. He may or may not be that; but the point is, whether he was not entitled to be remunerated for the services he rendered to the firm which pursued agricultural operations, in this case a coffee estate. Factually, there is no dispute that he did render such service and it is not stated that he was bound to bestow it except for remuneration. But if he had not supervised the agricultural operations of the firm, it would have been necessary to engage a third party for the purpose, in which case salary would have to be paid. The test for an allowance of the expenditure is always whether it has been incurred in the previous year and the expenditure was laid out or incurred wholly and exclusively for the purpose of the land. Literally, these requisites are satisfied in this case under section 5(e).