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 - Assessment years 1959-60 and 1960-61 - "D" was karta of assessee - HUF - Assessee through his karta was partner of two partnership firms - Department included remuneration received by "D' from said firms in assessment of HUF - However it was found that "D" was man of rich experience in line of business of two firms - From respective partnership deeds it was found that remuneration was paid to "D" for his personal qualification and not because of fact that he invested family fund in firms or represented firms - Whether on facts, it was manifest that there was no real or sufficient connection between investment of joint family funds and remuneration paid by partnership firms to D - Held, yes - Whether, therefore, it was to be held that remuneration of 'D' was not earned on account of any detriment to joint family assets and amounts of remuneration received by 'D' as managing partner of two partnerships were not assessable as income of HUF - Held, yes FACTS 'D' was the karta of the assessee HUF. The assessee through its karta, was a partner in two firms as per terms and conditions set out in the instruments of partnership dead of respective firms. 'D' was paid remuneration. The amounts received by 'D' were shown by the assessee in its returns of income along with balance of the share income from the aforesaid firms. The ITO in assessing the HUF included the remuneration received by 'D' as a part of the share income from the respective firms. Before the AAC the assessee contended that the remuneration received by 'D' was his personal income and the amounts were wrongly shown in the returns of the HUF as its income and should not have been included in the assessment. In so contending the assessee relied on relevant clauses of the instruments of partnership. The AAC accepted the contention of the assessee and held that the remuneration received by 'D' should be deleted from the assessment of the assessee. On appeal to the Tribunal it was held that the remuneration paid should be included in the total income of the assessee.…

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