Law:

Section:

Section 4 of the Income-tax Act, 1961 - HUF - Assessable as - Assessment year 1964-65 - Assessee was karta of HUF which held almost half shares of a company - Assessee was appointed as general manager of said company - He claimed that salary received by him as general manager of company was to be assessed in his individual capacity - ITO, however, held that salary income was liable to be assessed in hands of HUF - AAC as well Tribunal upheld ITO's order - Whether in view of fact that assessee became general manager because of shares held by his HUF and not on account of any personal qualification, amount received by him as general manager's remuneration was rightly assessed as income of HUF - Held, yes FACTS The assessee's family owned almost half shares of the company. Under the articles of association, the assessee was appointed as general manager of the company. For the relevant assessment year the assessee credited the income from salary to the account of the family. Later on, however, the assessee claimed that his income from salary should be assessed separately in his individual capacity. This claim of the assessee was rejected by the ITO holding that the entire income was to be assessed in the hands of the HUF. His appeals to the AAC and to the Tribunal failed. On reference: HELD The entire shareholding of the assessee was in lieu of the assets of the HUF which was previously invested in the partnership business. He became a director because of his shareholding. In the resolution, no doubt, he had been described as the general manager and the technical adviser, but there was nothing on the record to show as to what services he rendered in that capacity. Mere label of a general manager and technical adviser could not help him. It had to be remembered that the company had already a permanent managing director who was being paid a salary per month and further that the resolution by which the remuneration of the assessee was sanctioned was passed by himself and his father as the directors of the company. In these circumstances a very heavy onus laid upon him to show that the remuneration was paid to him by the company purely for his personal services. It…

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