9911796707
TMI Blog1968 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, and on partition were allotted to the assessee. An application filed by the assessee before the 1st Additional Income-tax Officer, Trichur, for recording the partition was accepted. In the meantime, on July 3, 1952, a private limited company, P. S. N. Motors (Private) Ltd. was floated with the object of taking over the motor transport business carried on by the assessee. By the articles of association, the assessee was to be the governing director of the company for life and to draw such remuneration and exercise such powers detailed in the agreement to be entered into between him and the company in that behalf, and so long as he held the office of governing director, the general management of the company's business was to remain in his hands. The assessee purchased 100 shares of the company of the face value of Rs. 100 each. On August 18, 1952, the assessee was appointed by the company governing director with an office allowance of Rs. 3,000 per mensem and a commission of 15 per cent. on the net profit. On the same day the directors approved the purchase from the Hindu undivided family of the assessee of assets (but not the liabilities) of the transport business valued at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishna Iyer from M/s. P. S. N. Motors (Private) Ltd., Trichur, represented his individual income and not the income of the Hindu undivided family of which he is the karta ? " At the instance of the assessee the following question also was referred by the Tribunal : " Whether the Commissioner has jurisdiction to revise the order of the Income-tax Officer in view of the decision of the Appellate Assistant Commissioner in appeals for the assessment years 1954-55 to 1957-58 in the assessment of Sri P. N. Krishna Iyer in the status of an individual? " The High Court answered the question referred at the instance of the Commissioner in the negative and the question referred at the instance of the assessee in the affirmative. The assessee has appealed to this court with special leave granted by this court. The question relating to jurisdiction of the Commissioner to revise the order of the Income-tax Officer presents little difficulty. Sub-section (1) of section 33B of the income-tax Act, 1922, provides : " The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income-tax Officer is erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d family and were not from the personal fund of the assessee. The company took over the assets belonging to the family and merely credited the family with rupees eight lakhs odd. The company valued the services rendered by the assessee in " the promotion of the company and the very large sacrifices he had made in agreeing to place his services at the disposal of the company and the immense benefit that the company received on account of his long experience, goodwill and reputation in this line of business ", at rupees five lakhs and allotted to the assessee 4,880 fully paid up shares of the company of the face value of Rs. 100 each. Dividends from the shares standing in the name of the assessee were credited not to the personal account of the assessee but to the account of the Hindu undivided family. In the view of the Tribunal the income from salary, commission and " sitting fee " earned by the assessee was his separate income, because the transport business was " built up with the sole effort of the assessee ". The High Court held that the business was at the partition of 1951 treated as the business of the joint family of the assessee and his brothers and was allotted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family. In M. D. Dhanwatey's case the facts were parallel to the facts in V. D. Dhanwatey's case and salary received by the karta of the Hindu undivided family was treated as income of the family. In S. RM. CT. PL. Palaniappa Chettiar's case the karta of a Hindu undivided family acquired 90 out of 300 shares in a transport company with the funds of the family. In course of time he became the managing director of the company. As managing director the karta was entitled to salary and commission on the net profits of the company, and was entrusted with control over the financial and administrative affairs of the company. The only qualification under the articles of association for the office of a director was the holding of not less than 25 shares in his own right. It was held that the shares were acquired by the family not with the object that the karta should become the managing director, but in the ordinary course of investment, and there was no real connection between the investment of joint family funds in the purchase of the shares and the appointment of the karta as managing director of the company. The remuneration of the managing director, it was held, was not earned on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
