Law:

Section:

Section 4 of the Income-tax Act, 1961 (Corresponding to section 3 of the Indian Income-tax Act, 1922) - Hindu undivided family - Assessable as karta of - assessee HUF representing interest of HUF became partner in a firm - In pursuance of clause of instrument partnership, karta received certain amount as remuneration for services rendered to firm - ITO included said remuneration in assessment of HUF - Whether merely because remuneration was earned for services rendered could not lead to conclusion that income could in no case belong to family - Held, yes - Whether since assessee never made out at case that he would have earned this remuneration from firm even if he were not a partner and that there was no link between patrimony and earning, remuneration was rightly included in assessment of HUF - Held, yes FACTS The assessee, was a Hindu undivided family represented by its karta. The karta representing the interest of the assessee became a partner in the firm. In pursuance of the clause in the instrument of partnership, the karta received certain amount as remuneration, for services rendered to he firm. The ITO included the remuneration in the assessment of the HUF. On appeal the karta contended that remuneration undivided by him from the firm was his individual income and was not the income of the assessee (Hindu undivided family). The Tribunal held that the remuneration received by the karta from the firm was rightly included in the assessment of the Hindu undivided family. On reference: HELD There is no rigid rule of law one way or the other and the enquiry is to be directed in all cases to find out whether the income was earned by a member to the detriment of the family funds and it is immaterial whether the use of family funds was direct or indirect. In other words, if the use of family funds is direct in the sense that the income directly arises from the investment of the family funds, it would be the income of the family, and, similarly, where the family funds qualify a member to earn that income and, therefore, the use of funds is remote or indirect, even then the income will belong to the family and partibility will not be negatived by the intervention…

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