MOOL CHAND C Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF ANDHRA PRADESH
Mool Chand C
COMMISSIONER OF INCOME TAX
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JAGANMOHAN REDDY, J. -
(1.) ON the application of the assessee under s. 82, Hyderabad IT Act, 8 of 1357 F., the Tribunal at
Bombay has referred the following question for determination of this High Court, viz.,
"Whether the sum of Rs. 5,000 and Rs. 5,029 could be deducted in the present assessment made on the assessee from the assessee's share of income from the firm of Mohamed Haneef and Abdul Qadar and others -
(2.) FROM the statement of the case forwarded to this Court by the Tribunal it appears that the assessee was assessed as an individual on his total income which, inter alia, consisted of a share of
income from the firm of Mohammed Haneef and Abdul Qadar and others, in which the assessee
had one - sixth share. This one -sixth was computed at Rs. 25,609. The assessee claimed that in
computing the total income, he should not only be allowed to deduct the interest paid on the
capital borrowed by him for investment in the partnership but also the amount of commission
which he had to pay to one Mohamed Yakoob through whose good offices he procured the loan as
an item of expense deductible under s. 12 of the Hyderabad IT Act, corresponding to s. 10 of the
Indian IT Act.
(3.) THE ITO disallowed this contention, but the AAC allowed a sum of Rs. 5,000 towards the interest and a sum of Rs. 5,029 paid to Mohd. Yakoob. In an appeal filed by the Department against this
order, the Tribunal, without going into the merits of the case, viz., whether the amount claimed by
the assessee was valid or not, held that on a reading of s. 21(b), 31(5) and 31(6), the whole share
of the partnership income of Rs. 25,609 is taxable without making any deduction either towards
interest or towards commission paid by the assessee.
The learned advocate for the assessee contends that when the share of profits from the partnership firm is included in the total income of the assessee, the allowable deductions under the
scheme of taxation are set out under s. 12 of the Hyderabad IT Act.
He refers particularly to cl. (iii) of sub -s. (2) of s. 12 which is as under :
"12. (1) The tax shall be payable by an assessee under the head 'profits and gains of business, profession or vocation' in respect of profits or gains of any business, profession or vocation carried on by him.
(2) Such profits or gains shall be computed after making the following allowances, viz., (iii) in respect of capital borrowed for the purposes of the business, profession or vocation, the amount of the interest paid :
(x) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission :
Provided that the amount of bonus or commission is of a reasonable amount and with reference to :
(a) the pay of the employee and conditions of service ;
(b) the profits of the business, profession or vocation for the year in question ; and
(c) the general practice in similar business, profession or vocation ;
(xv) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purposes of such business, profession or vocation."
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