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TMI Blog1965 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... Mathura Prasad, Sheo Prasad, Basdeo Prasad and their nephew, Dilsukh Rai (son of Badri Prasad, deceased), owned considerable property and carried on different businesses in the names of Messrs. Agarwal Iron Works, Agra, Messrs. Jagan Prasad Sheo Prasad, Messrs. Jagan Prasad Har Prasad and Messrs. Nek Ram Jagan Prasad. On October 11, 1948, a partition of the properties and the businesses of the family was made among the six branches and as a result of that partition a sixth share was allotted in the assets partitioned to the smaller Hindu undivided family of which Mathura Prasad was the manager. After partition of the joint family estate, the managers of the six branches entered into an agreement of partnership to carry on in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year Samvat 2006. Mathura Prasad filed another return in the status of an individual for the same previous year and in that year he disclosed an income of Rs. 21,000. It received as remuneration from the firm of Messrs. Badri Prasad Jagan Prasad ". The Income-tax Officer, F-Ward, Agra, held that the income disclosed by Mathura Prasad as an individual was liable to be taxed in the hands of the Hindu undivided family and directed inclusion of that amount in the assessment of the Hindu undivided family of Mathura Prasad. The order passed by the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal. The appellant then applied under section 66(1) of the Indian Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Hindu undivided family were invested. The Tribunal found that Mathura Prasad, the manager, became a partner in the firm with the help of joint family funds and as partner he was entrusted with the management of the Agarwal Iron Works. Allowance received by Mathura Prasad was, therefore, directly related to the investment of the family funds in the partnership business. In Kalu Babu Lal Chand's case one Rohatgi, manager of a Hindu undivided family, who took over a business as a going concern, promoted a company which was to take over the business. The articles of association of the company provided that Rohatgi would be the first managing director at a remuneration specified in the articles. The shares which stood in the name of Rohatgi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the capital in the firm, the karta brought in monies out of the till of the Hindu undivided family, then he must be regarded as having entered into the partnership for the benefit of the Hindu undivided family, and as between him and the other members of his family he would be accountable for all profits received by him as his share out of the partnership profits, and such profits would be assessable as income in the hands of the Hindu undivided family. The court then proceeded to consider whether that principle was applicable to the income derived by a manager as a partner of a managing agent to remuneration received by the manager as the managing director of the company, and held that if the manager was appointed a managing directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hindu undivided family, and as a partner of the firm he was entrusted with the management of the Agarwal Iron Works and he earned the allowance which was claimed to be salary. The right to draw the allowance was, in the view of the Tribunal, made possible, by the use of family funds. The family funds enabled him to become a partner and to claim the allowance for the services rendered. There was in the view of the Tribunal an inseparable connection between the joint family funds and the allowance received. The right to draw the allowance therefore arose direcly from the joint family funds. It may be recalled that in the second paragraph of clause 8 of the partnership agreement, though a monthly allowance of Rs. 1,500 was named as the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, because the properties of the family were furnished as security, but this court rejected that claim. We see no analogy between a case in which the property of the Hindu undivided family is sought to be encumbered for obtaining a benefit which is essentially personal to the manager, and a case in which with the aid of the family funds the manager of the family is able to enter into a partnership and to earn allowance, which he would not otherwise have been entitled to receive. The second contention needs no elaboration. It was suggested that Mathura Prasad earned the allowance sought to be brought to tax because of the special aptitude he possessed for managing the Agarwal Iron Works, and the allowance claimed by him was not earned by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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