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TMI Blog1975 (12) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ll and Company Ltd. was incorporated, which company had been formed to acquire the business of the partnership firm of cotton brokers and merchants with effect from 1st March, 1947. The assessee is the karta of the Hindu undivided family. The Hindu undivided family held 340 shares of Rs. 500 each in the Gill and Company and the assessee came to be appointed as one of the directors of the said company, the other four directors being four of the five erstwhile partners of the said firm. During the relevant assessment years K. K. Shah received by way of salary from Gill and Company (Private) Ltd. a sum of Rs. 42,000 and by way of bonus a sum of Rs. 14,000. He also received a remuneration for attending the meetings of directors. Up to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner and it was on the basis of these findings that the Appellate Assistant Commissioner was persuaded to accept the contentions on merits urged on behalf of the assessee. The Income-tax Officer being aggrieved by the order of the Appellate Assistant Commissioner preferred a further appeal to the Income-tax Tribunal and it was contended before the Tribunal that this was a case where the family was taxable as the basic fact was that the family's assets, viz., shares, represented the qualification for directorship. The Tribunal by its order dated 12th February, 1964, upheld the application of section 34(1)(b), but on the merits, after considering the decisions cited at the bar, viz., Commissioner of Income-tax v. Kalu Babu L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Chief justice and Tulzapurkar J. and by an order the learned Chief justice, speaking on behalf of the Bench, referred to a further decision of the Supreme Court in Raj Kumar Singh Hukam Chandji v. Commissioner of Income-tax [1970] 78 ITR 33 (SC), where the Supreme Court had laid down the test for determining whether the remuneration received by an individual is the income of the individual to whom it is purported to have been given or that of the Hindu undivided family of which he is a coparcener. In the opinion of that Bench that test to which reference will be made hereinafter would be required to be applied for determination of the question referred to in this reference. It was found further considering the statement of case originall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had been submitted by the Tribunal pursuant to the above directions. Before considering the further facts found by the Tribunal from the record before it (as was directed by the learned Chief Justice) on the above points, a brief reference may be made to the decision in Raj Kumar Singh Hukam Chandji v. Commissioner of Income-tax [1970] 78 ITR 33 (SC). At page 43 of the said report it is observed that : " 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to dispel any criticism that the remuneration as director was received by K. K. Shah as a result of any detriment suffered by the joint family. It has been found by the Tribunal that Gill and Company Private Ltd. was not promoted by Khushal K. Shah. It was an old firm which converted itself into a limited company in 1948, and he had no controlling interest in the shareholding. The total investment by the Hindu undivided family was of 340 shares of Rs. 500 each out of 5,000 shares in the aggregate. By the time he had been appointed as a director of this company, K. K. Shah had gathered great experience regarding dealings in cotton by spending all his life in the cotton business and it was his personal experience, qualifications and equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indu undivided family of which K. K. Shah was the karta but constituted his individual income. In addition to the amount of Rs. 56,300, which was sought to be taxed in the hands of the Hindu undivided family being the director's remuneration, including bonus and sitting fees received by K. K. Shah from Gill and Company Ltd., there were further amounts of Rs. 810 and Rs. 820, respectively, which represented director's fees received by K. K. Shah from companies other than Gill and Company Ltd. It has been observed by the Tribunal that " it is not disputed that any conclusion arrived at with reference to Rs. 56,000 also applied to the other amounts taxed " which would include the amounts received by K. K. Shah from the other companies. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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