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TMI Blog1983 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO allowing the remuneration of Rs. 10,000 each paid to the Karta for services rendered to the firms on behalf of the HUF. The CIT revised the orders of the ITO on 28th January, 1982 on the ground that the orders of the ITO were erroneous in so far as they were prejudicial to the interest of revenue inasmuch as, the assessees have rendered services only to the firms and not to the family and, therefore, there was no direct nexus between the services rendered by the Kartas to the families and the partnership business. Relying on the decision of the Supreme Court in the case of Jitmal Bhuramal vs. CIT (1962) 44 ITR 887 (SC) and in the absence of any contemporaneous records to show that the assessee was serving on behalf of the family only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective HUFs. However, he has stated that there was no agreement in writing for the payment of remuneration to the appellant partners by the respective HUFs. He further relied on the decision of the Supreme Court in the case of CIT vs. Ramniklal Kothari (1969) 74 ITR 57 (SC) for the proposition that the business carried on by the firm is the business carried on by the partners and as a matter of fact the profit derived by the appellant-partners were assessed as income of the family. On the same analogy he argued that the business carried on by the karta on behalf of the HUF is the business of the HUF. Therefore he urged that the ITO was correct in allowing the remuneration paid to the appellant-partners as the payment was for the business e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Jitmal Bhuramal on the basis of a specific finding of the Tribunal in that case to the effect that the members of the HUF have not rendered any services to the HUF. However, in the latter case of Jugal Kishore Baldeo Sahai vs. CIT (1967) 63 ITR 238 (SC), their Lordships of the Supreme Court have held that it was necessary that before the Karta receives remuneration it should be under a valid agreement and the tests laid down in that case were whether the agreement has been made by or on behalf of the members of the HUF and whether it was in the interest of the business of the family so that it could be justified on the grounds of commercial expediency. This is the test which is always to be applied when considering whether a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be a distinct legal category of service rendered to the HUF because it was for managing the affairs of the HUF by looking after the interest of the HUF in those other partnership business. Even the Allahabad High Court in the case of CIT vs. Raghunandan Saran (1977) 108 ITR 818 (All) has held that if the Karta is found to be actively looking after the business interest of the family in the firm of which he is a partner as Karta of the HUF and the remuneration paid is not excessive it is clearly an allowable deduction. On the basis of the aforesaid ratio the Gujarat High Court has considered the claim of remuneration of Rs. 24,000 per annum paid to Shankerlal Harishanker Dave by the HUF and held that the payment of remuneration was for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case, therefore, following the ratio decidendi of the Supreme Court, cited supra, it has to be held that the remuneration paid to the appellant Karta by the respective HUFs in the partnership business as such inasmuch as the HUF has made investment in the partnership firms which should be safeguarded. Therefore, the remuneration claimed by the assessee is allowable as a deduction as a matter of commercial or business expediency or as having been incurred wholly and exclusively for the purpose of business. On the basis of this finding, the claim is also supported by the ratio decidendi of the Supreme Court in the case of Jitmal Bhuramal (1962) 44 ITR 887 (SC) which has been relied upon by the CIT to reject the claim m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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