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TMI Blog1984 (12) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... -family here as share of profits from the firm or as the income of the karta in his individual capacity. The relevant factual position is as under : ------------------------------------------------------------------------------- Assessment Salary paid Interest paid Assessee-family's Total of year to karta to karta share of profit columns 2, 3 from the firm and 4 -------------------------------------------------------------------------------- (1) (2) (3) (4) (5) -------------------------------------------------------------------------------- Rs. Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... His work included supervision of the work of the staff. He also undertook tours for the purpose of business. 2. The assessee-family's accounts in the books of the firm showed a credit balance. This implied that the salary in question was not paid to the detriment of the assessee-family's funds. 3. The salary in question was credited separately to the account of the karta and not to the assessee-family's account. 4. That the karta rendered individual services to the firm stood proved, e.g., 'factory administration' was by its very nature work which required personal exertion by an individual. This cannot be regarded as part of the normal duty of a partner. 5. There was also sufficient judicial authority for allowing the assessee's cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before me is not difficult to decide because of the fact that the Supreme Court has had occasion to consider this very issue more than once. In Prem Nath v. CIT [1970] 78 ITR 319 (SC), it not only considered this issue but also referred to its earlier decisions on such an issue. It would, therefore, be useful to look at this decision. In Prem Nath's case the assessee was an HUF. Prem Nath was the manager of the family. He was admitted to a partnership styled 'K.C. Raj Co.' as representing his family. Under the terms of the partnership Prem Nath was entitled to an 'allowance of Rs. 700 per month' for 'rendering service' to the partnership. In proceedings for assessment of income-tax of the HUF, the ITO rejected the contention that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner in the two firms through its manager. The manager received remuneration from the firm. The Court held that in the absence of any real and sufficient connection between the investment of the joint family funds and the remuneration paid to the manager, the remuneration was not earned on account of any detriment to the joint family assets and the remuneration received by the manager as the managing partner of the two firms was not assessable as the income of the HUF. (d) In Raj Kumar Singh Hukam Chandji's case the Court held that it had to be seen whether the remuneration received by the coparcener was in substance though not in form was but one of the modes of return made to the family because of the investment of the family funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... runachala Nadar. On the other hand, the AAC has recorded factual details relating to the competence and experience of Arunachala Nadar and the nature of the services rendered by him, which go to show that essentially the remuneration was for services rendered by Arunachala Nadar. Hence, the salary income in question cannot be included in the assessment of the assessee-family here. Once the salary income is excluded, interest income also has to be excluded. This is because, there was no dispute before me that the interest income in question was wholly referable to the accumulated credit balance from the deposit of salary received by Arunachala Nadar in his account with the firm. I, therefore, see no room for interference with the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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