1990 (10) TMI 48 - HC - Income Tax

Summary

Issues involved:
1. Whether the salary received by the karta of a Hindu undivided family should be included in the share income of the family or assessed as the separate individual income of the karta.
2. Whether the amount of salary paid to the karta could be allowed as a deduction in the assessment of the Hindu undivided family.

Detailed Analysis:
The judgment dealt with income-tax references and writ petitions concerning the treatment of salary received by the kartas of Hindu undivided families in a partnership firm. The partnership firm, consisting of seven partners, had five Hindu undivided families as partners. The question was whether the salary received by the kartas should be included in the share income of the families or assessed as the individual income of the kartas. Initially, the Income-tax Officer included the salary in the share income, but the Appellate Assistant Commissioner ruled in favor of treating it as the individual income of the kartas. The Tribunal, however, held that the salary was paid for personal services and should be included in the share income. The Department appealed to the High Court, raising the issue of the salary treatment.

In addressing the first issue, the High Court referred to a previous decision where a similar question had been considered. The court noted that the salary was paid for personal services rendered by the kartas, not to the detriment of the family assets. Relying on previous Supreme Court decisions, the court held that the salary income of the kartas should not be included in the share income of the Hindu undivided families. Therefore, the court answered the first question in the negative, in favor of the assessee and against the Revenue.

Regarding the second issue, the court stated that once the first question was answered in the negative, the second question did not require consideration. Therefore, the court did not address the second question. As a result, the income-tax references were answered in favor of the assessee, and the writ petitions were allowed with the specified directions. The court concluded by stating that there would be no order as to costs in the matter.