Law:

Section:

Section 4 of the Income-tax Act, 1961 - HUF - Assessable as - Assessment year 1959-60 - Assessee-HUF returned income without including salary, commission and sitting fees received by its karta who was managing director of a company and had purchased its shares out of HUF funds - ITO included said payment in assessee's assessment - Tribunal held that remuneration of managing director could not be treated as HUF's income - High Court restored ITO's order - Whether not with object that karta should become managing director but in ordinary course of investment and there was no real connection between investment of joint family funds in purchase of shares and appointment of karta as managing director of company - Held, yes - Whether remuneration of managing director was not earned by any detriment to joint family assets and, therefore, remuneration received by karta as managing director was not assessable as income of HUF - Held, yes FACTS The assessee-HUF became a shareholder in a company and owned certain shares acquired with its funds, in 1934. From 1938-39 to 1959-60 the assessee had been submitting returns in the status of Hindu undivided family and up to 1949-50 the assessments were completed in that status. For the assessment years 1950-51 to 1955-56, the assessments were completed in the status of individual, though returns were submitted in the status of Hindu undivided family and the remuneration was included in those assessments. For the assessment year 1956-57, the assessee submitted the return in the status of Hindu undivided family but claimed for the first time that the remuneration and sitting fees from the company should be assessed separately in the karta's hands. The claim was accepted and a separate assessment made on him as an individual in respect of the remuneration and commission received from the company. This continued till the assessment for the year 1958-59. For the assessment year 1959-60, the assessee-family returned an income which did not include the salary, commission and sitting fees received by the karta. The ITO added the remuneration of the karta for the assessment of the Hindu undivided family and held that the commission was to…

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