Law:

Section:

Section 4 of the income-tax act, 1961-Hindu undivided family-Assessability of-assessee, karta of a huf, received remuneration as managing director from companies in which huf held shares-tribunal found that remuneration received was commensurate with assessee's vast experience and services rendered by him-whether such remuneration liable to be assessed in the hands of assessee as individual-held, on facts, yes Facts The assessee was the karta of a HUF. He received remuneration as managing director from certain companies in which the HUF funds were invested. The assessee claimed that the remuneration was for services rendered and could be assessed only in his hands as an 'individual'. The ITO negatived this contention. On appeal, the AAC confirmed the ITO's order. On further appeal, the Tribunal found that the assessee was possessed of a stature in public life and had also acquired experience in running several industries and businesses. The Tribunal also concluded that the remuneration paid to the assessee was commensurate with his vast experience and the services rendered by him to the companies. On reference : Held Whether the remuneration received by a coparcener, in substance, though not in form, was 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 paid for the services rendered by the individual coparcener, is relevant to determine whether the income is to be taxed in the hands of the HUF or the individual. If it is the former, it is an income of the HUF; but if it is the latter, then it is the income of the individual coparcener. If the income was essentially earned as a result of the funds invested, the fact that the coparcener had rendered some service would not change the character of the receipt. But if, on the other hand, it is essentially a remuneration for the services rendered by the coparcener, the circumstances that his services were availed of because he was a member of the family which had invested funds in the business or that he had obtained the qualification shares from out of the family funds would not make the receipt, the income of the HUF. In the…

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