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TMI Blog1983 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... he said firms. The karta, Sunderlal Nanalal, therefore, engaged Mahendra Sunderlal, one of the coparceners of the assessee-family, to help him in the management of the business of the said firms. Mahendra Sunderlal had to act as representative of the karta and it was agreed between said Sunderlal Nanalal and Mahendra Sunderlal that the latter was to be paid a monthly remuneration of Rs. 250 for the said services. The terms of the agreement were reduced to writing on November 16, 1968. In the course of the assessment proceedings, for the assessment year under reference, the assessee family claimed deduction of the remuneration of Rs. 3,000 paid to Mahendra Sunderlal in the year of account relevant to the assessment year in question. The claim did not find favour with the ITO who rejected it on the ground that no such claim was made in the past and that the payment of the salary was not expenditure (incurred) for earning income from the aforesaid firms. The assessee-family, therefore, carried the matter in appeal before the AAC, Ahmedabad, who by his order of November 26, 1973, held that the claim made by the assessee was admissible in the light of the two decisions of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as to enable the Tribunal or the court to conclude about the one by reference to its decision in respect of another agreement. Before we address ourselves to the construction of the agreement in the present case before us, we must shortly refer to the legal position as clearly established by, the decision of this court in Shankerlal H. Dave v. CIT [1980] 124 ITR 733. The Division Bench of this court was concerned with a similar claim for remuneration paid to one Shri Shankerlal Dave who happened to be the karta of his HUF comprising of himself, his wife and their one son and two daughters-all the children being minors. The said HU F was a partner through its karta, Shankerlal Dave, in four firms in the first two years under reference and in five firms for the subsequent years covered by the other reference. There was no other income of the joint family except relating to dividends, interest, etc. The claim for remuneration was founded on an agreement of October 30, 1965. The claim was rejected by the ITO by relying on the decision of the Supreme Court in Jitmal Bhuramal's case [1962] 44 ITR 887 (SC) on the short ground that there was no other independent business of the HUF in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been incurred wholly and exclusively for the purpose of the business. . The Division Bench also noted that the principle laid down in jitmal's case [1962] 44 ITR 887 (SC) was without any distinction between the salary paid to the karta and (salary paid) to the junior members of the family and there was no warrant to give a narrow interpretation so as to confine the right to deduct the remuneration paid by the HUF to junior members only. The Division Bench thereafter succinctly stated the legal position as under (p. 745 of 124 ITR) " If the remuneration to the karta under the agreement in question is not for the services to the partnership firms but it is for looking after the interests of the HUF, even in the Partnership business, that would be distinct legal category of services rendered to the HUF, because it was for managing the affairs of the HUF by looking after the interests of the HUF in those other partnership businesses. Therefore, the ratio of their Lordships does not depend upon the fact that in Jugal Kishore's case [1967] 63 ITR 238 (SC), the HUF had also some independent HUF business as well. The ratio evolved by their Lordships is to make a distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advocates of both the parties. The agreement recites as under : " Whereas the party of the one part is a partner in M/s. Nanalal Mansukhram and M/s. Mansukhram Bhagwandas having business in cotton and money-lending at Mansukhram, Ahmedabad; And whereas the party of the one part, due to his old age and health, is not in a position to devote full time and give proper attention and therefore employed the party of the other part, Shri Mahendra Sunderlal, in services on and from October 22, 1968, corresponding to Kartik Sud I S.Y. 2025 as their representative at their cost and risk to assist in the management of the said firms, the details whereof are as under: 1. Shri Mahendra Sunderlal has been appointed as a representative of the party of the first part to assist and manage the business of M/s. Nanalal Mansukhram and M/s. Mansukhram Bhagwandas and that he will act according to the instructions of the partners. 2. Shri Mahendra Sunderlal shall carry on all the work by being faithful to the party of the one part and through him to the firm and he has to take full care that no affairs of the firms leak out. 3. That the party of the one part shall pay Rs. 250 (Rupees two hundr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these words only meant that for the consequence of the acts of Mahendra Sunderlal, the responsibility will be of Sunderlal Nanalal and it would not mean that the consequence would be at the cost and risk of the joint family since Sunderlal Nanalal has been described also in the capacity of partner. We are afraid this does not appear to be the real intention of the parties since this would mean that Sunderlal Nanalal has appointed Mahendra Sunderlal as his representative to act for and on his behalf in the affairs of the firms. This contention urged on behalf of the Revenue would have justification provided Sunderlal Nanalal had withdrawn from the management of the firms on account of his old age and health. It is common ground that Sunderlal Nanalal continued to manage the affairs of the firms but since he was finding it difficult to assist the same in his capacity as karta, one of the members of the HUF, namely, Mahendra Sunderlal, was appointed to assist him in the affairs of the business for which he was to be paid from the income of the family. Clause 4 of the agreement also supports the view which we are inclined to take. The other partners of the partnership firms were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. The description of the party of the first part in the dual capacity was necessary because the arrangement sought to be effected by the agreement in question was to procure the services of Mahendra Sunderlal for assisting Sunderlal Nanalal in the management of the affairs of the firms but these services are to be obtained as observed by us above for the benefit of and in the interest of the family since Sunderlal as a karta was finding it difficult to attend to the business of the firms so as to take proper care of the interest of the HUF of which he was a karta. No doubt Mahendra was to assist Sunderlal in the management of the firms but that by itself does not render the services of Mahendra Sunderlal as the services to the firms. The assistance is to be rendered to Sunderlal who was hitherto managing the affairs of the firms as a partner but was also looking after the interest and the well being of the family and on account of his old age and health when he found himself incapable of carrying out this dual role consistently in the interest of the firms as well as the family, he decided to appoint one of the members of the family to assist him. That circumstance, therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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