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 - 'G', who was karta of HUF, represented that family in a firm - Later, he was appointed manager of that firm on a remuneration - In assessment proceedings salary paid to 'G' as manager of firm was included in income of HUF on ground that remuneration received by 'G' was paid to him as a representative of HUF - Whether in absence of finding that salary income which was received by 'G' was directly related to any assets of HUF utilised in firm, said income could not be treated as income of HUF - Held, yes FACTS By a deed dated 26-8-1957, thirteen persons agreed to carry on business in partnership in cardamoms, batel nuts, pepper and other condiments. 'G' one of the partners, was appointed manager of the partnership on a remuneration of Rs. 500 per mensem. The firm was registered and the total share of profits allocated to 'G' in the assessment for the assessment year 1960-61 was Rs. 14,734 which included the amount of Rs. 6,000 which was salary payable to him for managing the business of the partnership. 'G' was the karta of HUF and he represented that family in the partnership. Before the ITO, the HUF contended that the amount of Rs. 6,000 which was included in the total share allocated to 'G' was not liable to be assessed as the income of the family and that it was liable to be assessed as 'G's personal income. The departmental authorities rejected the said contention. They held that, since the remuneration received by 'G' was paid to him as a representative of the HUF, it must be treated as income of the family. The Tribunal also agreed with that view. The High Court on question referred held that the salary was to be excluded from the total income of the assessee family. On appeal to the Supreme Court : HELD The departmental authorities merely proceeded on the footing that, where a member of a HUF becomes a partner in a firm as representing the family, everything that he receives must be treated as the income of the family. That rule is inconsistent with the of this Court in V.D. Dhanwatey v. CIT [1968] 68 ITR 365. In…

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