1984 (3) TMI 9 - HC - Income Tax

Summary

Issues: Assessment of salary received by a member of a Hindu undivided family from a firm in personal assessment or as part of total income for the Hindu undivided family.

Analysis:
The judgment pertains to the assessment of salary received by partners of a firm who are also members of a Hindu undivided family. The main issue was whether the salary received should be assessed in the individual's personal assessment or included in the total income for the assessment of the Hindu undivided family. The case was similar to a previously decided matter and was awaiting the disposal of a related case by a Full Bench. The partners received a salary from the firm, which was included in the hands of the Hindu undivided family by the Income-tax Officer. The history of the business indicated a transition from being a Hindu undivided family business to a partnership. The partners had previously included the salary in their returns as part of their smaller Hindu undivided families but later claimed it as individual income. The Appellate Assistant Commissioner allowed the claim, which was upheld by the Tribunal.

The Tribunal referred a question of law to the High Court regarding the assessment of the salary in the hands of the Hindu undivided family. The High Court, considering the facts and precedents, held that the salary paid to the partners was not detrimental to the family's share income from the firm. It was noted that there was no real and sufficient connection between the joint family funds' investment and the payment of remuneration to the partners. The court emphasized that the salary was not earned at the detriment of the joint family assets and, therefore, could not be assessed as the income of the Hindu undivided family. The Tribunal's decision was upheld, and it was ruled that the salary income received by the partners should not be assessed in the hands of their Hindu undivided families. The judgment was supported by the Chief Justice in agreement with the detailed analysis provided by the presiding judge.