9911796707
TMI Blog1977 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ted could not be assessed in the hands of the assessee-HUF for all the three years ? " Originally, there was a HUF consisting of one Doulatrai H. Sanghavi and his three sons, Champaklal D. Sanghavi, M. D. Sanghavi and Rasiklal D. Sanghavi. Champaklal is the karta of a smaller HUF, which is the assessee. D. H. Sanghavi was a partner having 12 annas share in the firm of M/s. Champaklal Co., which dealt in cotton waste. There was a partition in the assessment year 1948-49 between Doulatrai and his sons and Champaklal became a partner in the firm of M/s. Champaklal Co. to the extent of three annas share, the other brothers also being partners. Doulatrai retired from the firm in 1952 and the share of each of the three brothers, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tus of HUF. But the ITO did not accept this contention and the income was taxed in the hands of Champaklal as individual. Then in the assessment year 1959-60 Champaklal pleaded for separating the HUF income, but having failed before the ITO, he went in appeal and, in appeal, the AAC ordered the ITO to assess the income from dividends and property in the hands of the HUF of which Champaklal was the karta. Similar direction was given in respect of the assessment years 1960-61 arid 1961-62. However, the ITO, while making the assessments on the HUF for the assessment years 1960-61 to 1962-63, took the view that since the assessee had taken a stand that the income from dividends came from a corpus which belonged to the HUF, the matter with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring on behalf of the revenue has mainly contended that Champaklal must have been appointed as a director because of the shareholdings of the HUF, and, therefore, there must be said to be established a nexus between the director's remuneration and the corpus of the HUF and, therefore, the director's fees and remuneration was liable to be treated as a part of the income of the HUF. Mr. Mehta appearing on behalf of the assessee has relied on a decision of the Supreme Court in Raj Kumar Singh Hukam Chandji v. CIT [1970] 78 ITR 33, in which, according to the learned counsel, the legal position with regard to remuneration paid to the director of a company in a case where a HUF of which the director was a karta held shares has been laid down a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the managing director's remuneration received by the karta was assessable in his individual hands and not in the hands of the HUF. While taking the above view the Supreme Court laid down the principle which has to be borne in mind in such cases in the following words : " In our opinion from these subsidiary principles, the broader principle that emerges is whether the remuneration received by the coparcener in substance though not in form was but one of the modes of return made to the family because of the investment of the family funds in the business or whether it was a compensation made for the services rendered by the individual coparcener. If it is the former, it is an income of the Hindu undivided family but if it is the latter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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