Law:

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Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Whether remuneration paid to karta is allowable when payment is not disbelieved and no unreasonableness is found in it - Held, yes FACTS The assessee-HUF was partner in a firm through its karta and it paid remuneration to the karta for looking after the business on behalf of the assessee. The ITO disallowed the deduction of salary but the Tribunal allowed the assessee's claim. On reference: HELD In the absence of prohibition in any law, if members of the HUF decided to pay some remuneration to the karta who is the Manager for having taken up responsibility of the business, the same cannot be refused. When on facts the payment was not disbelieved and there was no unreasonable ness found in that regard, the Tribunal was right in allowing remuneration to the karta although there was no specific evidence to the effect that any income earned by the HUF other than the share income from the firm necessitated commensurate services which were rendered by the karta. S.C. Ray for the Applicant. JUDGMENT Mohapatra, J.-These are three references made under section'256(1)of the Income-tax Act, 1961 ('the Act'), on the following common question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing remuneration of Rs. 9,000 to the karta although there was no specific evidence to the effect that any income earned by the Hindu undivided family other than the share income from the firm necessitated commensurate services which was rendered by the karta?" 2. All the three assessee's are HUFs. They constitute a partnership firm named as P. Laxminarayana & Sons. Out of the shares of the joint families in the profits of the firm, Rs. 9,000…

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