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TMI Blog1967 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... rument of partnership, dated January 21, 1954. In terms of the partnership, one Prahladrai Mahwar became a partner in the firm in his representative capacity, as karta of a Hindu undivided family known as Messrs. Prahladrai Mahwar. The share of Prahldrai Mahwar in the partnership admittedly was Re. 0-2-1 1/2 pies. Before Prahladrai became a partner of the assessee-firm, he had been rendering services to the Delhi branch of the partnership and was earning a remuneration. After he became a partner in the assessee firm, he continued to render services to the firm and earn remuneration therefor. For the assessment year 1957-58, the remuneration paid to Prahladrai amounted to Rs. 8,500 and for the assessment year 1958-59 the remuneration amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which he is the karta." In the view taken, the Appellate Assistant Commissioner enhanced the assessment by inclusion of the amount of remuneration paid to Prahladrai. Aggrieved by the order of the Appellate Assistant Commissioner the assessee appealed before the Appellate Tribunal. The point urged by the assessee before the Tribunal was that the salary paid to Prahladrai was paid to him in his personal capacity and should not be considered as salary paid to him as a partner. The Tribunal negatived the contention and the reasons which weighed with the Tribunal are set out below : " Although the family fund may be utilised by Sri Prahladrai Mahwar as his capital and he might be a partner in his representative capacity as karta of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er made by the Tribunal and obtained a reference to this court on the following question : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the salaries paid to Sri Prahladrai Mahwar were rightly disallowed in terms of section 10(4)(b) of the Income-tax Act, 1922 ? " Before we proceed further, it is convenient for us to set out at this stage provisions of section 10(4)(b) of the Income-tax Act : "(4) Nothing in clause (ix) or clause (xv) of sub-section (2) shall be deemed to authorise the allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The karta of the Hindu undivided family, however, may and frequently does enter into partnership with outsiders on behalf and for the benefit of his joint family. But when he does so, the other members of the family do not, vis-a-vis the outsiders, become partners in the firm. They cannot interfere in the management of the firm or claim any account of the partnership business or exercise any of the rights of partners. So far as outsiders are concerned, it is the karta, who alone is, and is in law recognised, as the partner. Whether in entering into partnership with outsiders the karta acted in his individual capacity and for his own benefit, or he did so as representing his joint family and for its benefit, is a question of fact. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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