1957 (9) TMI 68 - HC - Income Tax

Summary

Issues:
1. Inclusion of salary and commission of the assessee's wife in the assessee's income under section 16(3)(a)(i).
2. Whether a partner can be employed as an employee in the firm.
3. Whether the remuneration received by the wife arose from her membership in the firm.

Analysis:

1. The judgment dealt with the assessment of the assessee for two years wherein the income of the assessee's wife, received as salary and commission, was included in the assessee's income under section 16(3)(a)(i). The Tribunal concluded that the wife received the remuneration as a partner and not as an employee of the firm, thus justifying its inclusion in the assessee's income.

2. The first question raised was whether a partner can be employed as an employee in the firm. The court relied on legal principles stating that a partner cannot be employed by the firm as it creates a legal impossibility for a partner to be both employer and employee simultaneously. The judgment cited the case law of Ellis v. Joseph Ellis & Co. to support the position that a partner's work and remuneration within the firm do not establish an employer-employee relationship.

3. The second question focused on whether the remuneration received by the wife arose from her membership in the firm. The court analyzed the relevant provisions of section 16(3)(a)(i) which require the inclusion of income arising from the membership of the wife in the firm where her husband is a partner. The court examined the affidavit submitted by the assessee, which confirmed that the wife was receiving remuneration as a partner based on a variation in the partnership terms. The court concluded that the remuneration received by the wife was directly linked to her membership in the firm, falling within the scope of section 16(3)(a)(i) and correctly included in the assessee's income.

In conclusion, the judgment clarified the legal position that a partner cannot be an employee of the firm and upheld the inclusion of the wife's remuneration in the assessee's income as it stemmed from her partnership in the firm.