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TMI Blog1968 (2) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of the agreement made on May 16, 1965, between him and the Allied Motors Private Ltd. is assessable in the hands of the assessee Hindu undivided family consisting of B. N. Talwar and his soils ? " The assessee is a Hindu undivided family consisting of B. N. Talwar and his sons. Rai Bahadur Parmanand Talwar had six sons, of whom B. N. Talwar is the eldest. The father carried on a prosperous automobile business at Peshawar under the name " Khyber Automobiles ". In September, 1942, he made a settlement of varying amounts in favour of each of the six sons and also made over the automobile business to the sons on condition that they carried it on in partnership. The automobile business was, in accordance with the wishes of the father, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p business. Out of Birkett's holding, B. N. Talwar acquired 1,995 shares. On May 16, 1955, an agreement was entered into between Allied Motors Ltd. and B. N. Talwar. The agreement plays a prominent part in the case and some of its conditions may be set out. Under clause 1, B. N. Talwar was appointed to the office of deputy chairman of the company for the purpose of looking after the interest of the company in general and in Uttar Pradesh in particular. The appointment was for a period of 20 years commencing April 1, 1955. Paragraph 6, which is of immediate relevance, provided : " For his services as the deputy chairman of the company now at Lucknow or any other subsequent office to which he will be transferred the said B. N. Talwar shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax the Tribunal has now made this reference. The question referred by the Tribunal mentions three figures of Rs. 38,918, Rs. 35,184 and Rs. 38,300 as the salary and allowances assessed for the assessment years 1958-59, 1959-60 and 1960-61, respectively. The assessment order relating to the assessment year 1958-59 has alone been made part of the statement of the case and we do not have the assessment orders for the remaining two years. From a perusal of that assessment order, it appears that the figure Rs. 38,918 is made up of the salary, income-tax paid on the salary, bonus received and add-backs on account of a part of the car allowance and entertainment allowance not allowed. Learned counsels for the parties are agreed that the fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in the partnership business and the remuneration paid to V. D. Dhanwatey under the partnership deed on account of the general management and supervision of the partnership business. On the other side of the line is the decision delivered, on the same date, by the Supreme Court in S. RM. CT. PL. Palaniappa Chettiar v. Commissioner of Income-tax where on the finding that the Hindu undivided family purchased shares not with the object that the karta should become the managing director but in the ordinary course of investment, and that there was no connection between the investment of the Hindu undivided family funds for the purchase of the shares and the appointment of the karta as managing director of the company, it was held that the remu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualification for eligibility to the office of deputy chairman. It was only subsequently, on January 16, 1956, that article 113 was amended under which the brothers became permanent directors and were to hold at least 2,500 shares each. The Tribunal has found that the personal qualifications of B. N. Talwar were responsible for his selection and appointment to the post and categorically held that the remuneration received by him should be treated as quid Pro quo for the services rendered by him under the agreement. It did not find any nexus between the shares held by the Hindu undivided family and the remuneration earned by B. N. Talwar, and concluded that the salary and allowances received by B. N. Talwar as deputy chairman were not earne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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