1965 (6) TMI 1 - HC - Income Tax

Income from salary, commission and sitting fees -Tribunal was not justified in holding that the income represented his individual income and not the income of the HUF of which he is the karta because character of the income has to be determined, taking into account the basic foundation from which it emanates

Summary

Issues:
1. Determination of whether income received by an individual from a company represents personal income or income of a Hindu undivided family.
2. Jurisdiction of the Commissioner to revise the order of the Income-tax Officer in a specific case.

Analysis:

Issue 1:
The primary issue in this case is to determine whether the income received by an individual from a company should be considered personal income or income of a Hindu undivided family. The case revolves around the source of funds used to purchase shares in the company, which subsequently led to the individual receiving salary, commission, and sitting fees. The court analyzed the agreement signed by the individual with the company, which detailed his remuneration and powers. It was noted that the individual did not possess personal funds, and the funds used to purchase shares were deemed to have come from the Hindu undivided family. The court considered various factors, including the sale of assets by the family to the company and the treatment of dividends from shares, to establish the nexus between the company and the family. Citing relevant legal precedents, the court emphasized that income traceable to family property must be considered joint family income, not individual income. Consequently, the court ruled in favor of the department, concluding that the income in question belonged to the Hindu undivided family.

Issue 2:
The second issue pertains to the jurisdiction of the Commissioner to revise the order of the Income-tax Officer in a specific case. The Commissioner revised the assessment order of the Hindu undivided family for a particular year under section 33B of the Indian Income-tax Act, 1922. The court examined the provisions of section 33B, which empower the Commissioner to review and modify orders if deemed prejudicial to the revenue's interests. Despite the assessment being termed as protective, the court held that the Commissioner had jurisdiction to revise the order, even if the assessment of the individual's income had been finalized earlier. The court emphasized the wide wording of section 33B, affirming the Commissioner's authority to enhance, modify, or cancel assessments. Consequently, the court answered the jurisdictional question in the affirmative, supporting the Commissioner's revision of the assessment order.

In conclusion, the court ruled in favor of the department regarding the classification of income and affirmed the Commissioner's jurisdiction to revise the assessment order. The judgment provides a detailed analysis of the legal and factual aspects surrounding the issues raised, ensuring a thorough examination of the case's complexities.