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TMI Blog1985 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 21,600 towards salary and bonus to the Karta for his personal exertion. The claim was rejected by the ITO on the ground that the Karta was the only coparcener of the HUF which consisted of himself and his wife only. According to the ITO since wife is only a member of the family and not a coparcener, it was incumbent on the part of the Karta to run the business and he could not employ himself as an individual to be entitled to salary in individual capacity. Consequently, he disallowed and added back Rs. 21,600. 2. On appeal, the AAC confirmed the disallowance made by the ITO. On second appeal, the Tribunal in its order dt. 30th March, 1981 in ITA No. 2238 (Mds)/1980 restored the matter to the AAC for fresh adjudication in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not followed by the AAC and that the order of the AAC should, therefore, be set side but that of the ITO restored. 5. Before us, the ld. Departmental Representative reiterated the tests laid down by the Supreme Court in the case of Jugal Kishore Baldeo Sahai and supported the order of the ITO. In particular he contended that the agreement was not genuine but farce. In the alternative he submitted that the salary claimed ws excessive. The ld. counsel for the assessee on the other hand supporting the order of the AAC stated that there was agreement in writing, a copy of which was filed before the AAC and such claim was allowed in the past. 6. We have duly considered the rival contentions. The Supreme Court in the case of Jitmal Bhuramal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family for services rendered to the family business becomes his separate income, and consequently, a deductible expenditure under s. 10(2)(xv) of the Act when computing the income of the family. In similar circumstances, if a Karta offers his services to the family instead of choosing an independent career to his separate income and receives remuneration from the family, there is no reason why the remuneration so paid to him cannot be treated as an expenditure for carrying on the business of the family and consequently expended wholly and exclusively for the purpose of the business and deductible under s. 10(2)(xv) of the Act. As we have already indicated above, the general view expressed by commentators of Hindu law as well as in decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied whether they are major or not specified whether they are major or not. Be that as it may. At least there is no dispute that the wife of the Karta is a member of the family and is competent to enter into agreement with the Karta all acting together on behalf of the family. In our opinion, the plea of the ITO that the Karta was the sole coparcener and, therefore, there was no obligation to remunerate himself out of the business income of the HUF cannot be accepted as correct in view of the observation of the Supreme Court extracted inasmuch as what is relevant is whether there is an agreement by or on behalf of the family for payment of remuneration to the Karta. The order of the AAC shows that there is valid and written agreement by and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Karta is reflected by the assessment of the Karta on remuneration earned from the HUF and, therefore, the payment is genuine. The HUF has also earned sizeable income form commission business which was obviously possible only on account of exertion and devotion of the Karta to the family business. Applying the ratio of the Madras High Court in the case of S. A. P. Annamalai the claim of deduction is valid and should be allowed as having been incurred wholly and exclusively for the purpose of business under s. 37(1) of the IT Act, 1961. In our opinion even the quantum of remuneration cannot be said to be excessive or unreasonable as the Karta could have as well earned this amount of remuneration had he chosen to render his services else ..... X X X X Extracts X X X X X X X X Extracts X X X X
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