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TMI Blog1971 (8) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ting cinema films in the aforesaid cinema hall. The profits of the business were shared by the assessee and Dhodi in the ratio of 75 : 25. The partnership between the assessee and Dhodi continued till 1957. On December 31, 1957, a deed of partnership was executed by the assessee and Dhodi. According to the partnership deed, the capital of the partnership was to be Rs. 10,000 out of which Rs. 6,000 were to be contributed by the assessee and Rs. 4,000 by Dhodi. The share of the assessee and Dhodi in the profit was to be 60% and 40%. The partnership deed recited that Rs. 750 per mensem were payable as monthly rent of cinema building, furniture and projector, by the assessee to the landlord. The licence, which the assessee had obtained from Razi-ud-din for running the cinema, expired on December 31, 1958. Razi-ud-din then expressed his unwillingness to renew the lease in favour of the assessee except on the condition that the assessee should run the cinema hall in partnership with Razi-ud-din and that no one else should be a partner. On December 31, 1958, the assesse addressed a letter to Dhodi in the course of which it was stated: "As you are aware the agreement of lease of cinema wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisite licence to exhibit pictures in that hall. It was stated that Razi-ud-din did not know English and was not conversant with the cinema business. He, therefore, entered into partnership with the assessee for a period of five years to commence the said cinema business with effect from January, 1, 1959. The partnership deed recited that the assessee had advanced a loan of Rs. 80,000 to Razi-ud-din. The amount was to be utilised in part for making necessary additions and alterations in the cinema hall, and for having essential amenities therein. Razi-ud-din was to nominate the assessee, or any other person that the assessee might like to be nominated to perform all the duties of the licensee. The share of Razi-ud-din and the assessee in profit and loss were to be equal. The responsibility of running the cinema strictly in accordance with the terms and conditions of the licence and the rules in force was that of the assessee and he was to be in sole charge and management of the partnership business. A bond for an amount of Rs. 80,000 was also excuted by Razi-ud-din in favour of the assessee. The cinema hall was renovated and it started functioning thereafter with effect from Augus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to a deduction in computing his share of the firm's profits in respect of interest paid by him on capital borrowed for the purpose of investment in the firm, but that sub-section was not exhaustive of the deductions permissible to a partner in computing his share of the firm's profits. It was urged before the Tribunal that the assessee on account of his age, being not in a position to manage the cinema business all by himself, had, in order to discharge the duty cast upon him under the terms of the partnership deed, to arrive at an understanding with Dhodi. It was also pointed out that the only alternative left to the assessee, if he did not agree to the terms of Razi-ud-Din, was that he would have to give up the business completely. The compelling requirements of the business, according to the assessee, forced him to take Dhodi as his nominee for actually running the cinema. The Tribunal found force in the above contentions and observed: "The facts as mentioned above go conclusively to show that it was the compelling circumstances of the business that necessitated the assessee in arriving at the arrangements referred to above with S. R. Dhodi. The commission paid by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 of the Act of 1961. According to that section, any expenditure laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "profits and gains of business or profession". We are not impressed by the argument that the only deduction, which can be permitted from a partner's share in the income of a firm, is that given in sub-section (3) of section 67 of the Act of 1-961. The said sub-section reads as under: "Any interest paid by a partner on capital borrowed by him for the purposes of investment in the firm shall, in computing his income chargeable under the head 'profits and gains of business or profession' in respect of his share in the income of the firm, be deducted from the share." The above sub-section gives statutory recognition to the principle accepted by the courts that a partner is entitled to a deduction in computing his share of the firm's profits in respect of the interest paid by him on capital borrowed for the purposes of investment in the firm. There is, however, nothing in the sub-section as may indicate that the said sub-section is exhaustive and that deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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