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TMI Blog1967 (10) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ather and four major sons. The assessee became a shareholder in the Trichy-Sri Rangam Transport Company Ltd. (hereinafter referred to as "the company") in 1934 and owned 90 shares out of the 300 shares of the company. The shares were acquired with the funds of the Hindu undivided family of the father and his four major sons. There were initially four shareholders including the assessee, two of whom were directors. On the death of one of the directors, the assessee became a director in 1941 and on the death of another director who was managing the business, the assessee became the managing director with effect from 1942. By a resolution dated April 16, 1944, the company granted him an honorarium of Rs. 3,000 for the year 1943-44 and subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 13, 1959, which was the previous year for the assessment year 1959-60, the assessee-family returned an income of Rs. 26,780 which did not include the salary, commission and sitting fees received by the karta which amounted to Rs. 18,683. The Income-tax Officer added the remuneration of the karta for the assessment of the Hindu undivided family and on the basis of the decision of this court in Commissioner of Income-tax v. Kalu Babu Lal Chand held that the commission was to be treated as income of the family. The assessee appealed to the Appellate Assistant Commissioner but the appeal was dismissed. The assessee took the matter in further appeal to the Income-tax Appellate Tribunal, Madras Bench. The Tribunal held that the case was governe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the present case was governed by the decision of this court in Commissioner of Income-tax v. Kalu Babu Lal Chand, that the remuneration earned by the managing director was not earned as a result of the utilisation of the joint family funds in the business and there was no detriment to the joint family assets or the use of the joint family assets in the business. It was not therefore a right proposition to state that under the principles of Hindu law the remuneration of the managing director in the present case was directly an accretion from the utilisation of the joint family funds and, therefore, constituted the income of the Hindu joint family. It was pointed out that in Commissioner of Income-tax v. Kalu Babu Lal Chand th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of Rohatgi as the managing director and hence the managing director's remuneration was, as between him and the Hindu undivided family, the income of the family and was taxable in its hands. That is the true ratio decidendi or the principle upon which the case was decided. At pages 331, 332 of the report, S. R. Das C.J., speaking for the court, set out the basis of the decision in the following passage : "The karta was one of the promoters of the company which he floated with a view to take over the India Electric Works as a going concern. In anticipation of the incorporation of that company the karta of the family took over the concern, carried it on and supplied the finance at all stages out of the joint family funds and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed in its hands." Now, what are the facts found by the Appellate Tribunal in the present case ? In 1934, the joint family had acquired 90 shares out of the 300 shares of the company. The shares were acquired with the funds of the Hindu undivided family of which the father was the karta. On the demise of one of the directors, the assessee became a director in 1941 and on the death of another director who was managing the business the assessee became the managing director with effect from 1942. It is apparent, therefore, that the joint family had control only of 90 out of 300 shares and the shares were purchased in the ordinary course of business and not for the purpose of qualification of the karta to become a director. The shares w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treasurer could not be treated as an accretion to the income of the Hindu undivided family. We consider it also necessary to state that the decision of the Madras High Court in Commissioner of Income-tax v. S. N. N. Sankaralinga Iyer was not impliedly overruled by this court in Commissioner of Income-tax v. Kalu Babu Lal Chand. It was merely pointed out that the material facts of that case were different from those of Kalu Babu Lal Chand's case. It was, for instance, found in Commissioner of Income-tax v. S. N. N. Sankaralinga Iyer that the remuneration of the managing director was earned by rendering services to the bank and no part of the family funds were utilised except that the necessary shares to acquire the qualification of a managin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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