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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 ..... hare 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 amounted to Rs. 9,000 per annum. The assessee claimed the remuneration paid to Prahladrai as business expenditure. The Income-tax Officer found in favour of the claim and allowed the claim for deduction on the theory that the services were be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 Hindu undivided family, the only effect thereof is that the income allocated to him in terms of section 23(5)(b), will be assessed in the hands of the family. In the partnership itself Sri Prahladrai Mahwar is shown as a partner. Accordingly, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly 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 any such profits or gains ; and nothing in clause (xv) of sub-section (2) shall be deemed to authorise-- (a) ............ (b) any allowance in respect of any payment by way of interest, salary, commission or remuneration made by a firm to any partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome 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 instant case, there is no dispute that Prahladrai entered into the partnership representing his joint family and for the benefit of that family. But although that is so, the relationship between the partnership and Prahladrai was that of an individual app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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