Law: Income Tax Act (XI of 1922)

Section:

Income-tax Act (XI of 1922)----   ----- Ss. 10 (2) (xv), & 25-A-Firm Whether Hindu undivided family or firm can be a partner- Partner ship with karta of family-Salary paid to junior members of Hindu undivided family for services rendered to firm--Whether allowable in assessment of Hindu undivided family.   A Hindu undivided family can be allowed to deduct salaries paid to members of the family, if the payment is made as a matter of commercial or business expediency ; but the service rendered must be to the family.   Where a Hindu undivided family becomes partner of a firm through its karta, the coparcenery has no place in the partnership ; the karta alone is the partner.   A Hindu undivided family carried on business, and the family, through its karta, was also a partner in a firm carrying on business The karta agreed to pay two junior members of the family, A and B, a certain monthly salary each for services to be rendered to the family in relation to the business of the family. He also agreed to pay a monthly salary to two other junior members, C and D, for services to be rendered to the firm. In the assessment of the Hindu undivided family, the amounts paid as salary to A and B were allowed by the Tribunal, but the salary paid to C and D was not allowed on the ground that they did not render their services to the family but only to the firm :   Held, that, as C and D were serving the firm, they were serving an entity which was separate and distinct from the Hindu undivided family and any service to the partnership cannot be regarded as service to the Hindu undivided family sufficient to attract the application of section 10 (2) (xv) of the Income-tax Act, because it cannot be said to be wholly and exclusively for the Hindu undivided family. The salary paid to C and D were, therefore, rightly disallowed in the assessment of the Hindu un divided family.   Jitmal Bhuramal v. Commissioner of Income-tax (1959) 37 I T R ; 28 affirmed.   Charandas Haridas v. Commissioner of Income-tax (1960) 39 I T R 202 ; Commissioner of Income-tax v. Nandlal Gandalal (1960) 40 I T R 1 and Dulichand Laxminarayan v. Commissioner of Income-tax…