COMMISSIONER OF INCOME-TAX Vs. REMAHOMED KASSIM ROWTHER

JUDGEMENT

(1.) The first question referred is "whether there was a genuine and valid partnership." This depends upon the construction of the agreements dated the 11 April 1922 executed by 33 persons in favour of the petitioner. The petitioner has been treated as the sole proprietor of his firm and been assessed accordingly, and he contends that these 33 persons who have executed the agreement of April 1922 (Ex. A) are his partners in the business. The Commissioner has found that this agreement does not constitute a partnership agreement and we entirely agree. Apparently there is a provision that each of the executants is to have a certain share in the profits of the business when ascertained at the end of the two years which it is to be in force, No provision is made for their liability in case of loss and the complete control of the business is retained by Muhammad Kassim, who contributed the whole capital. Not only is he to have the control of the business but even persons holding power-of- attorney from him are to have the same power. The executants agree to be bound by Muhammad Kassim's orders and the orders of those holding his power-of-attorney and also agree that, if they contravene the provisions of the agreement, they can be dismissed. The proprietor has also the power of altering the shares. On these facts, it is clear that this is not a partnership agreement and that these 33 persons were merely the employees of Muhammad Kassim and were entitled to certain shares in the profits when ascertained at the end of the two years.

(2.) The second question runs as follows: If the answer to the first question is that there is no partnership, was the Income- tax Officer right in refusing to deduct from the assessable income the portion of the profits which was paid to the employers as wages?

(3.) The petitioner claims to deduct the shares payable to the employees under Section 10 (ix), Indian Income-tax Act, which runs any expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of earning such profits or gains.