1984 (11) TMI 143

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..... ; Name of the firm                  Salary received       Salary received No.                                     in assessment         in assessment                                         year 1979-80  &nbs .....

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..... nbsp;                3,770                                            --------               ------- 3. The ITO was of the view that a firm has no separate legal entity from its partners and that the salary received by the partner was, in reality, only a mode of division of profits of the firm. He, therefore, held that the aforesaid amounts were includible in the income of the assessee-HUF. .....

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..... the business or whether it was a compensation made for the services rendered by the individual coparcener. If it is the former, it is an income of the Hindu undivided family but if it is the latter then it is the income of the individual coparcener. If the income was essentially earned as a result of the funds invested the fact that a coparcener has rendered some service would not change the character of the receipt. But if on the other hand it is essentially a remuneration for the services rendered by a coparcener, the circumstance that his services were availed of because of the reason that he was a member of the family which had invested funds in that business or that he had obtained the qualification shares from out of the family funds .....

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..... . Now, in the present case, it is not disputed that Shri N.R. Gopalakrishnan was an experienced jeweller and he contributed his personal skill to the promotion of the businesses of the firms in which he was a partner. Obviously, therefore, he received the salaries in question from the firms for the services rendered by him. There is no material on record to establish a direct nexus between the salary received by Shri N.R. Gopalakrishanan and the investment of the funds of his HUF or to show that the payment of salary was to the detriment of the family funds invested in the firms. In such a situation, I am of the opinion that the AAC has rightly held that the amounts in question are not includible in the income of the assessee-HUF. 10. The .....

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