1966 (3) TMI 5 - HC - Income Tax

Total income - includibility of remuneration received by karta of the assessee-HUF - services rendered to the firm of C and Company and the sub-partnership in which he is a partner representing the interests of the assessee-HUF - held that it is includible in total income

Summary

Issues Involved:
1. Whether the remuneration received by Prem Nath, karta of the assessee-Hindu undivided family (HUF), from Messrs. K. C. Raj and Company and the sub-partnership of Messrs. Kishan Lal, was rightly included in the total income of the assessee-HUF.

Issue-Wise Detailed Analysis:

1. Nature of Remuneration:
The primary issue was whether the remuneration received by Prem Nath, the karta of the assessee-HUF, should be treated as his individual income or the income of the HUF. The Tribunal had included this remuneration in the total income of the HUF, which the assessee contested, arguing it was the individual income of Prem Nath.

2. Legal Precedents:
The judgment referenced several key cases:
- Amar Nath v. Hukam Chand Nathu Mal: The Privy Council held that in a joint Hindu family, the rule is that acquisitions by members are joint property unless proven otherwise.
- Commissioner of Income-tax v. Kalu Babu Lal Chand: The Supreme Court held that the remuneration received by a managing director, whose position was secured using joint family funds, was assessable as the income of the joint family.
- Piyare Lal Adishwar Lal v. Commissioner of Income-tax: The Supreme Court distinguished this case by holding that the salary of a treasurer, who provided family property as security, was his individual income since his appointment was not primarily due to the family funds.
- Mathura Prasad v. Commissioner of Income-tax: The Supreme Court held that remuneration earned by a partner managing a business with the aid of joint family funds was taxable as the income of the family.

3. Principles Established:
The judgment established several principles:
- Income earned by a member of a joint family is his separate property if obtained by his own exertions and without detriment to the family estate.
- Income earned at the expense of joint family funds is joint family income.
- There is a presumption in favor of partibility and detriment to the patrimony if family funds are used.
- Partibility is not negated by the personal element of the individual member's character.
- If a member's income is earned primarily due to the use of family funds, it is joint family income.
- Exceptions exist where income is earned solely or predominantly due to personal qualifications.

4. Application to the Present Case:
The court found that no facts were alleged to rebut the presumption of partibility. The remuneration received by Prem Nath was linked to his position as a partner, which was secured using family funds. Hence, the income was rightly included in the total income of the HUF.

5. Conclusion:
The court concluded that the remuneration received by Prem Nath from Messrs. K. C. Raj and Company and the sub-partnership of Messrs. Kishan Lal was rightly included in the total income of the assessee-HUF. The answer to the referred question was in the affirmative, in favor of the revenue. The Commissioner was awarded costs fixed at Rs. 250.

Final Judgment:
The question was answered in the affirmative, agreeing that the remuneration received by Prem Nath was rightly included in the total income of the assessee-HUF.