1969 (2) TMI 2 - SC - Income Tax

There was no real or sufficient connection between the partnership to D - remuneration was paid for the specific acts of management done by D - salary received by D from the two firms is not includible in the assessment of the Hindu undivided family of which Shri D was the karta - Revenue appeal dismissed

Summary

Issues:
1. Whether the remuneration received by a member of a Hindu undivided family should be considered as the income of the family or the individual member.
2. Interpretation of clauses in the partnership deeds regarding remuneration received by the member.

Analysis:
The judgment revolves around the issue of determining whether the remuneration received by a member of a Hindu undivided family should be treated as the income of the family or the individual member. The respondent, a Hindu undivided family, contended that the remuneration received by one of its members, Shri D. C. Shah, was his personal income and should not be included in the assessment of the family. The remuneration was received from partnerships in which Shri D. C. Shah was a partner. The Appellate Assistant Commissioner accepted the assessee's contention, but the Income-tax Tribunal disagreed, leading to an appeal to the High Court.

The High Court, relying on precedent, held that the salary received by Shri D. C. Shah from the partnerships should not be included in the assessment of the Hindu undivided family. The judgment delves into previous cases where similar issues were considered. In cases where the remuneration was directly related to the investments of family assets in a partnership, the income was treated as that of the Hindu undivided family. However, if there was no real connection between the investment of family funds and the remuneration received, the income was not assessed as that of the family.

In the present case, the Supreme Court found that the remuneration received by Shri D. C. Shah was not earned due to any detriment to the joint family assets. The clauses in the partnership deeds indicated that the remuneration was paid based on Shri D. C. Shah's personal qualifications and specific acts of management, rather than representing the family. The Court emphasized that the remuneration was not linked to the family's investments in the partnerships. Therefore, it was concluded that the remuneration received by Shri D. C. Shah should not be considered as the income of the Hindu undivided family.

The judgment highlights the importance of the specific circumstances and the nature of the connection between family investments and the remuneration received in determining whether such income should be assessed as that of the family. In this case, the Court found that the remuneration was not attributable to the family assets, leading to the dismissal of the appeals and the conclusion that the remuneration received by Shri D. C. Shah was not assessable as the income of the Hindu undivided family.