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TMI Blog1981 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the ITO was that the remuneration received by the assessee as managing director did not accrue to him in his individual capacity but it represented the income of the HUF of which he was the karta. The ITO did not agree with the contention of the assessee and held that the remuneration received by the assessee as managing director actually represented the income of the assessee in his individual capacity. He completed the assessment accordingly. The ITO gave five reasons enumerated in his order in support of his conclusion and also derived support from the decision of the Supreme Court in the case of Raj Kumar Singh Hukam Chandji v. CIT [1970] 78 ITR 33. 2. The assessee appealed to the Commissioner (Appeals) and contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices rendered by the assessee in his individual capacity as managing director as was clear from the service agreement entered into between the assessee and the aforesaid company. In particular, he referred to the increments given in the subsequent years and the perquisites given to the assessee, which was consistent only with remunerating the personal services of the assessee. He referred to the decision in the case of Raj Kumar Singh and some other decisions enumerated in his order in support of his conclusion. In this view of the matter, he confirmed the action of the ITO and dismissed the appeal. 3. In this second appeal before us, Shri S.P. Mehta, the learned counsel for the assessee, urged before us that the decision of the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der for the year 1969-70, he stated that the ITO, after applying his mind to the question, decided to assess the sum in the hands of the HUF though as a protective measure, and there has been no change in the situation to call for a different decision during the year under consideration. He further stated that the assessee, who was aged 31 years in 1968, was a commerce graduate and had no special qualification for acting as a managing director. 4. Shri G.S. Bhargava, the learned representative for the department, on the other hand, supported the order of the Commissioner (Appeals). He stated that the agreement dated 23-1-1968 and the minutes dated 31-1-1968 were not before the ITO or the Commissioner (Appeals) and so they have not conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no co-ordination between the two files. When both the files were consolidated with one officer during the year under consideration, the ITO applied his mind for the first time to the issue and considering all the facts and circumstances of the case and the law on the subject, came to the conclusion that the remuneration under consideration belonged to the assessee in his individual capacity. He stated that each assessment year is separate and the principle of res judicata did not apply to income-tax proceedings. He relied on the decision in the case of Raj Kumar Singh and CIT v. Dineshchandra Sumatilal [1978] 112 ITR 758 (Guj.) in support of his contention. 5. We have considered the contentions of both the parties as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had invested funds in that business or that he had obtained the qualification shares from out of the family funds would not make the receipt, the income of the Hindu undivided family." 6. It is, therefore, necessary to see whether the remuneration under consideration paid to the assessee was one of the modes of return made to the family because of the investment or it was a compensation made for the services rendered by the assessee in his individual capacity. We find that during the year under consideration the paid-up capital of the company was Rs. 7,79,300 and the shareholding of the HUF of which the assessee was the karta was Rs. 73,275 which comes to nearly 11 per cent of the former. Even if we take the sum of Rs. 1,11,112 as the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managing director of the company. Hence, we come to the conclusion that the remuneration under consideration was paid primarily in return for the personal services rendered by the assessee as its managing director. The mere fact that the HUF of which the assessee was the karta had some investment in the shares of the company would not make any difference to the above conclusion, vide the decision in the case of Raj Kumar Singh. Once we come to the factual conclusion that the remuneration under consideration was paid primarily for the personal services rendered by the assessee, it follows, on the authority of the decision in the case of Raj Kumar Singh, that the remuneration is assessable in the hands of the assessee in his individual capaci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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