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TMI Blog1987 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to the assessment year 1965-66 is the same as the question for the assessment year 1964-65. In the order of reference, the question relating to exclusion of director's remuneration from the total income has been mentioned only in relation to the assessment year 1965-66. The annexures to the statement of facts show that it arises in the assessment year 1964-65 as well, but it has not been referred to us in relation to that assessment year. In the petition filed by the Revenue under section 256(1) of the Income-tax Act (hereinafter to be referred to as " the Act "), there is a challenge to the exclusion of the director's remuneration in relation to the assessment year 1964-65 as well, but the only question suggested by the Revenue is the one relating to the exclusion of share income. No question relating to the director's remuneration is mentioned in that petition. Be that as it may, in the view that I have taken, it is not very relevant whether that question has been referred to us in relation to the assessment year 1964-65 or not. In relation to the exclusion of share income received from M/s. Gopal Narain Singh, the stand of the Revenue is that it was assessable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession out of the properties received by him from the ancestral nucleus. In terms of the last will of Ram Bilas Singh, the entire estate of the testator had been bequeathed to the three grandsons, namely, Gopal Narain Singh, the assessee, Govind Narain Singh and Krishna Narain Singh. Two grandsons, namely, Shyam Narain Singh and Girdhar Narain Singh, born subsequently had thus no interest in the joint family property of Ram Bilas Singh. In 1961, Anokhi Devi, wife of Nageshwar Prasad Singh, instituted a suit as guardian of the two newly born sons, Shyam Narain Singh and Girdhar Narain Singh. In the suit, the partition decree of 1943 was severely assailed. The plaintiffs asserted in the suit that the assets of the branches of Ram Bilas Singh had always remained joint and the members have always been the members of the joint Hindu Mitakshara family. It was also asserted by the plaintiffs that although by the final decree of July 21, 1943, considerable movable and immovable properties were allotted to the branch of Ram Bilas Singh, the said properties, in fact and in law, belonged to the members of the joint family of the branch of Ram Bilas Singh and so the decree showing the allot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Narain Singh in respect of M/s. Singh and Chanchani (P.) Ltd. and Hind Strip Mining Corporation Ltd. were also assessed as income of the Hindu undivided family as the shares of those companies had been acquired out of the funds of the Hindu undivided family properties. The assessee, being aggrieved by the order of the Income-tax Officer, appealed to the Appellate Assistant Commissioner who accepted the contention of the assessee that the share income from the properties belonged to the assessee in his individual capacity. He did so on the basis of the earlier order of the Tribunal in respect of the assessment years 1960-61, 1961-62, 1962-63 and 1963-64. In regard to the director's remuneration, the Appellate Assistant Commissioner held that those were received on account of the individual skill and acumen displayed in the management of the two companies, namely, M/s. Singh and Chanchani (P.) Ltd. and Hind Strip Mining Corporation Ltd. The order of the Appellate Assistant Commissioner was affirmed by the Tribunal in the appeal filed by the Revenue. The Revenue, being aggrieved by the orders of the Appellate Assistant Commissioner and the Tribunal, claimed reference to this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties were Hindu undivided family properties, yet the Tribunal accepted the stand of the assessee that his share income was individual property from the fact that the Income-tax Officer had assessed the income up to August 28, 1963, in the status of the trust and that shows that the Income-tax Officer believed that the trust property was not Hindu undivided family property till August 23, 1963. The Tribunal observed that the Income-tax Officer would not have assessed the income of the assessee for the assessment year 1964-65 and that the decree did not direct the three earlier beneficiaries to repay the amount to the other co-sharers. In my view, this is where the Tribunal committed a serious error. The fact that Gopal Narain Singh, Krishna Narain Singh and Govind Narain Singh were not made to disgorge some of the income for payment to Shyam Narain Singh and Girdhar Narain Singh is not the crux of the matter. The real matter to be considered is that there was an unequivocal declaration by all the co-sharers that all the properties were joint and the entire income was Hindu undivided family income. The Appellate Assistant Commissioner had held the share income to be the individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee became a director of the company by dint of his having shares in those companies and those shares actually belonged to him in the status of the Hindu undivided family. In paragraph 7, the Appellate Assistant Commissioner observed as follows : " 7. Although the funds belonged to the Hindu undivided family with which the shares were acquired in M/s. Hind Strip Mining Corporation Ltd. and M/s. Singh and Chanchani (P.) Ltd., the director's remuneration paid to Gopal Narain Singh is for his individual skill and acumen brought into play in the management of these two companies. Hence, the director's remuneration of Rs. 23,072 would belong to Gopal Narain Singh." The finding of facts thus is that Gopal Narain Singh, the assessee, had been paid director's remuneration on account of his individual skill and acumen brought into play and paid by the management of M/s. Hind Strip Mining Corporation Ltd. and M/s. Singh and Chanchani (P.) Ltd. This question was considered by the Tribunal in paragraph 13 of its order, but it shows that for the assessment for the years 1958-59 to 1963-64, the assessee was claiming that the director's remuneration should be assessed in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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