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TMI Blog1983 (10) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... y to be considered in the individual assessment of the Kartha and offered only the balance as net share income to be assessed in the assessment of the HUF. Before the ITO each of the partners stated that the remuneration was paid to him by the firm in his individual capacity for attending to certain works on behalf of the firm such as purchase of raw materials, supervision of factory, distribution of yarn and collection of sarees from weavers, collection of dues, etc. The ITO, however, observed that there is no justification for deducting the salary stated to be paid to the Kartha from the share income of the assessee HUF. The claim was that the HUF had paid to the Kartha for looking after its interest in the firm apart from the normal serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Kartha is determined under s. 67(1) including the salary paid to the partner and from the share income so computed no deduction can be made. On a careful consideration of the rival submissions we are unable to accept the Department s claim. The Karthas of the respective assessee HUFs were partners in the firm under the partnership deed dt. 13th April, 1969. Cl. 8 thereof provided that the partners were to be paid salary as per mutual agreement for paying special attention to the affairs of the firm s business. It is stated that under this clause each one of the Karthas was paid salary of Rs. 7200 for the assessment year in question as also for the earlier years. We were informed that in fact for the asst. yrs. 1977-78 and 1978-79 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the modes of return made to the family because of the investment of the family funds in the business or whether was a compensation made for the services rendered by the individual coparcener. If it is the former, it is an income of the HUF, but if it is the latter then it is the income of the individual coparcener. If it is essentially a remuneration for the services rendered by a coparcener, the circumstances that his services were availed of because of the reason that he as a member of the family which had invested funds would not make the receipt the income of the HUF". In the present case it is not disputed that the firm has paid salary to the partners, the disallowance in the assessment of the firm being under s. 40(b) and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be. Bearing the above principle in mind it is manifest that the mere fact that the share income is determined under s. 67 in the hands of the partner including the salary would not automatically render such share income liable to assessment in the hands of the assessee HUF which has beneficial interest in the firm. The salary paid to the partners by the firm being obviously for the service rendered by the partners to the firm, such salary would represent their personal and individual income only and will have to be excluded from the share income for the purpose of the assessment of the HUF. This being the position we agree with the AAC s finding that the salary paid to the Kartha cannot be included in the assessee s assessments. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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