Panigrahi, J.
1. The petitioners, Messrs. The Orient Fast Colour Dye Works, are a firm carrying on business in dyeing yarn. In assessing the net profits of the firm for the assessment year 1947-48 deduction of a sum of Rs. 5686/-/-was claimed on the ground that it represented the remuneration paid to Messrs. Nikunjakishore Das and Dhananjoy Lenka, two of the partners of the firm, for carrying on the business of partnership. The Income-tax Officer disallowed the claim, included the sum in the net profits and assessed the same to income-tax.
2. The case for the petitioners is that the management of the firm's business was entrusted to another firm known as Friends United Agency, said to have been constituted the managing agents of the Orient Past Colour Works. It was also alleged that Messrs Nikunjakishore Das and Dhanan-joy Lenka are partners in the firm of Friends United Agency. The Appellate Assistant Commissioner found that M/s. Friends United Agency did not in fact conduct the business of the assessee firm and that no legal contract had been proved to have existed between the assessee and the Friends United Agency. He accordingly held that the payments made to M/s. Nikunjakishore Das and Dhananjoy Lenka were payments made to the partners of the assessee-firm as such. On appeal, the Income-tax Appellate Tribunal, while upholding the order of the Appellate Assistant Commissioner, also held that the three persons appointed by the assessee-firm were so appointed in their individual capacity and not as members of any other firm. The Tribunal's finding was that the partnership known as Friends United Agency was, in fact, not in existence at any date prior to the date on which the partnership agreement was executed. The Tribunal accordingly came to the conclusion that the amount claimed as remuneration was chargeable to tax and was not liable to be excluded under Section 10 (4) (b), Income Tax Act. An application was thereafter made to this Court, under Section 66 (2) of the Act praying for the issue of a writ of mandamus on the Tribunal asking them to state a case for the decision of this Court. This Court accepted the finding of fact arrived at by the income-tax authorities, namely, that the payment of Rs. 5686/- was made to Sri Nikunjakishore Das and Sri Dhananjoy Lenka in their individual capacity and not as members of any subsidiary firm, namely, Friends United Agency of which they were also partners. The Court held, relying on the decision of the Bombay High Court reported in -- 'Jesingbhai v. Commr. of Income-Tax, Bombay', A. I. R. 1950 Bom. 198 (A) that it is possible for common partners to constitute two separate firms in respect of different business carried on by these partners and that, therefore, the mere fact that some of the partners of the assessee firm constituted a different firm would not disentitle them to claim deduction. There may be a distinction between remuneration paid to a partner, as partner of the assessee firm, and a payment made to a partner in his individual capacity. In this view of the law, the Court directed the Appellate Tribunal to state a case under Section 66 of the Income Tax Act.
3. The question of law that has therefore been referred to us by the Tribunal is :
'Whether on the facts and in the circumstances of this case the Tribunal was right in relying on the provisions of Clause (b) of Sub-section (4) of Section 10 of the Indian Income-Tax Act and refusing to deduct from the profits of the firm the sum of Rs. 5866/-/- paid to Shri Nikunjakishore Das and Shri Dhananjoy Lenka as remuneration for managing the business of the firm, The Orient Fast Colour Dye Works, during the year 1946.'
The Tribunal points out that in the face of the finding that the Friends United Agency was not at all in existence at the date on which the resolution appointing them as managing agents was passed, the question whether the remuneration paid to Messrs. Nikunjakishore Das & Dhananjoya Lenka is hit by the provisions of Clause (b) of Section 10 (4) does not arise. The Tribunal however held the view that there was no distinction between payments made to a partner as a partner, and those made to him in a different character.
4. Section 10 of the Income-Tax Act deals with profits and gains of a business, profession or vocation and the tax payable thereon. Sub-section (2), Section 10 enumerates what allowances may be made in calculating the profits or gains. Clause 15, Sub-section (2), Section 10 permits the deduction of any expenditure not being an allowance of the nature described in any of the Clauses (i) to (xiv) and not being in the nature of capital expenditure or personal expenses of the assessee allowed or expended wholly .... or exclusively for the business of such business, profession or vocation. This is clearly a residuary clause and takes in all such allowable deductions as have not been specifically enumerated In Clauses (i) to (xiv). In order that a claim for deduction may be brought under theresiduary clause it must satisfy the three conditions laid down therein : (1) the expenditure musthave been incurred for the purpose of the business, or profession or vocation which is taxed; (2) it must have been incurred wholly & exclusively for the purposes and (3) it should not be in the nature of a capital expenditure or personal expenses or 'the assessee. For instance, expenditure incurred for the maintenance of the assessee, or his family, or his establishment, cannot be exempted from assessment -- 'Bowers v. Harding', (1891) 1. Q. B. 560 (B). Similarly any capital expenditure incurred for the purpose of the business, though not personally, is not deductible. Sub-section (4) of Section 10 is in the nature of an exception to some of the clauses of subjection (2) and says :
'Nothing in Clause IX of Sub-section (2) shall be deemed to authorise the allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation .....; and nothing in Clause(XIV) of Sub-section (2) shall be deemed to authorise (a) .....
(b) any allowance in respect of any payment by way of interest, salary, commission, or remuneration made by a firm to any partner of the firm.'
On a plain reading of Clause (b) of Sub-section (4) of Section 10 it appears that any amount paid by way of interest, salary, commission, or remuneration, made by a firm to a partner, is not deductible from the profits of the firm.
5. It was, however contended that the expression 'payment made by way of remuneration by a firm to any partner of the firm' contemplates payment to the partner as such and not a payment made to him in his individual capacity. There appears to be no warrant for introducing any such words as 'a partner as such' or 'a qua-partner', or 'otherwise than in his individual capacity' into the plain language of the Section. Partnership is a legal person and is liable to be taxed, like another person. Therefore, the entirety of such profits which have been earned by the firm should be brought to charge and no portion can be exempted by giving the same away to a partner as his salary or commission or remuneration or interest. In the case of a company paying salaries to its officials and servants such payments are deductible under Section 10 (2) Clause (x). Similarly, interest payable on capital borrowed by a company is deductible under Section 10 (2) (iii). But the Act makes a distinction between a company and a partnership and expressly provides that any sum paid as interest, salary, or remuneration to the partner of a firm is not entitled to deduction. This was brought about by an amendment of the Act in 1939, on account of a divergence of views in the Courts. In some cases sums paid to a partner in his individual capacity were held allowable, while sums paid to him in his capacity as a partner were not allowed to be deducted. There are also some cases which have held that the distinction was unwarranted. The Income-Tax Enquiry Commission stated :
'We recommend that in the computation of the profits of a firm, whether registered or not, no deduction should be made in respect of any sum whether described as salary, interest, commission or otherwise, which is payable to a partner'.
This recommendation was accepted by the Legislature and Clause (b) of Section 10 (4) was inserted to dispel all doubts. It is no longer open to a firm to claim any deduction on account of a sum having been paid to a partner as remuneration or commission or salary. This was the view taken by the Madras High Court in -- 'R. A. Goodzer & Co. v. Commr. of Excess Profits Tax, Madras',AIR 1949 Mad. 407 (C). In that case, the assessee was a firm composed of three partners. Two of them also were carrying on commission agency business, known as Lakshmi Co. and Bhatt Co. respectively. Even before the constitution of the partnership firm (which was the assessee) they were doing commission agency business. The question that arose for decision in that case related to two sums paid by way of commission to Messrs. Lakshmi Company and Bhatt Company. It was contended for the assessee firm that the payments were made to these two institutions, not as partners of the firm, but as proprietors of two independent concerns. Their Lordships, overruling the contention, held that there was' no distinction made between payments made by way of interest, commission, salary, or remuneration made to a partner as a partner, and those made to him in his individual capacity or in a different character. I am in entire agreement with the view taken by their Lordships of the Madras High Court, as to the meaning of the clause in question. To introduce words which are not to be found in the text would, be to introduce discrimination against the State: which is not warranted by any canon- of interpretation. As Rowlatt, J. observed in -- 'Cape Brandy Syndicate v. Inland Revenue Commrs', (1921) 1 K. B. 64 (D) we have to look fairly at what is said, and at what is said clearly, and that is the text.
6. In this case on the finding of fact that there was no such firm as Friends United Agency in existence at all, on the relevant date, the payments made to the partners are hit by the provisions of Section 10 Sub-section (4) Clause (b), and is not deductible from the tax.
7. Our answer to the reference would, therefore, be that the Tribunal is right in its interpretation of Clause (b) of Sub-section (4) of Section 10, Income-Tax Act.
8. This application is dismissed with costs. Hearing fee Rs. 100/-.
Narasimham, J.
9. I agree that the application should be dismissed with costs. But I feel some doubt about the correctness of the view put forward in -- 'AIR 1949 Mad. 407 (C)'.
10. The facts of the case have been fully mentioned in the judgment of my Lord the Chief Justice. Sri Nikunjakishore Das and Sri Dhananjoy Lenka are two of the seventeen partners of the firm known as the Orient Fast Colour Dye Works, Cuttack. In assessing the said firm to income-tax in respect of its income for the year 1946, the Income-tax authorities declined to deduct the sums. of Rs. 3,249/- and Rs. 2,437/- said to have been, paid as remunerations to the aforesaid two partners respectively for managing the business of that firm. Those partners took the plea that the said remunerations were paid to them not in their individual capacity but as partners of another firm known as the Friends United Agency. The Income-tax authorities, however, rejected this plea and the Appellate Tribunal held as a finding of fact that the said remunerations were paid to Sri Nikunja Kishore Das and Sri Dhananjoy Lenka in their individual capacity and not to the subsidiary firm, namely, the Friends United Agency. The words 'individual capacity' appear to have been used by the Tribunal in contradistinction to their capacity as partners of the subsidiary firm Friends United Agency. The further question as to whether the said sums were paid to the two partners in their capacity as partners of the main firm, namely, the Orient Fast Colour Dye Works or in any other capacity was not gone into by the Tribunal who relying on -- 'A. I. R. 1949 Mad. 407 (C)' thought that this distinction was not material in the facts and circumstances of this case. The only finding of fact which is binding on this Court is that the said sums were paid to the two partners for managing the business of the main firm and not as partners of the subsidiary firm. On this finding of fact two further questions arise :
(i) if remuneration is paid to some of the partners of a firm for managing that firm is that payment made to them qua partners?
(ii) if it be held that the said payment is not made to them qua partners is it a permissible deduction under Section 10 (4) (b) of the Indian Income-tax Act?
I think this petition can be disposed of by answering the first question only, leaving the second question open.
11. Section 2 (6B) of the Indian Income-tax Act says that the expression 'partner' shall have the same meaning as in the Indian Partnership Act. Section 4 of the Indian Partnership Act defines 'partnership' as the relation between persons who have agreed to share the profits of a business 'carried on' by all or any of them acting for all. Thus the carrying on of the business of partnership is the primary duty which all the partners of some of the partners acting for all are required to do. The management of a business is, in all material respects, not distinguishable from the carrying on of the business. Thus if some of the partners of a firm are authorised by all the partners to manage the business they are carrying on the business qua partners and not in any other capacity. This seems to be the main reason why under Section 13 (a) of the Partnership Act a partner is not entitled to receive remuneration for taking part in the 'conduct of the business' unless there is a contract between the parties to the contrary. The underlying assumption is that the conduct of business is part of the duty of a partner in his capacity as a partner. The difference between 'conduct of the business', 'carrying on of the business' or 'management of the business' is inappreciable and is not material for the purpose of the present case. Therefore, when Sri Nikunja Kishore Das and Sri Dhananjoy Lenka who are two of the partners of the firm the Orient Past Colour Dye Works, managed the business on behalf of all the partners as authorised by them, it must be held that their management of business was in their capacity as partners of that firm. Hence, the remuneration received by them would be qua partners and not in any other capacity.
12. In this view, any further discussion as to whether Section 10 (4) (b) after the amendment of 1939, makes no distinction between the remuneration paid to a partner in his individual capacity and the remuneration paid to him for services rendered by him as a partner of that firm becomes academic. Even, if the latter view be held, the very fact that the remuneration was paid for managing the business is decisive.
13. In -- 'A. I. R. 1950 Bom 198 (A)' it was held that for the purposes of the Income-tax Act common partners can constitute two separate firms in respect of different businesses carried on by these partners and a question whether in a particular case there are two firms or only one firm is a question of fact. Thus, if in law there can be two firms A and B for the purposes of the income-tax Act though the partners in both the firms are identical, a question arises whether the remuneration or commission paid to the firm B in undertaking any work for the firm A, is a permissible deduction under Section 10 (4) (b) of the Indian Income-tax Act in computing the profits of the firm A. If the Bombay decision is carried to its logical conclusion the answer must be in the affirmative and the correctness of the view taken by the Madras High Court in -- 'A. I. R. 1949 Mad 407 (C)' may be open to some doubt. The pre-1939 view to the effect that only those payments which were made to partners of that firm were not permissible deductions may gain some strength. I would, however, reserve my opinion on this question because the reference can be disposed of without answering it.