ITAT Allows Claim of Business Expenditure on Salary Received from Partnership Firm to Former ICAI President

The Income Tax Appellate Tribunal (ITAT), Delhi, in one of its recent rulings, allowed an assessee to claim business expenditure from the salary received from the partnership firm.

The applicant, Atul Kumar Gupta, a Chartered Accountant, being a partner in M/s. A P R A & Associates LLP, Chartered Accountants, received a remuneration of Rs 24,00,000, on which he claimed business expenditure of Rs 6,76,456 for travelling expenses, telephone expenses, depreciation, repair and maintenance, fuel expenses, driver salary, etc. However, the Assessing Officer (AO) disallowed this claim, saying that the professional expenditure is not allowable from remuneration received by the partner.

The applicant filed an appeal before the CIT(A), but the appeal was rejected. Therefore, the petitioner approached the ITAT, Delhi. Before the tribunal, the assessee contended that the salary received by a partner is business income and, accordingly, the same was offered to tax under the head “Income from Business and Profession“. Citing section 28(v) of the Income Tax Act, 1961, the applicant mentioned that any salary, bonus, commission or remuneration received by a partner from such a firm is in the nature of business income.

The Tribunal noted that the same issue had been considered by the Tribunal in the assessee’s own case, where he was allowed to claim the expenditure. The Tribunal noted that the assessee has been claiming this expenditure from salary received from the partnership firm in the past, so the same should be allowed for the subsequent assessment years. The Tribunal held that any expenditure incurred by the partner only for the purpose of earning such business income is allowable expenditure under sections 32 and 37

Based on these facts, the tribunal allowed the assessee to claim business expenditure from the salary received from the partnership firm.