Law:

Section:

Section 4 of the Income-tax Act, 1961 - Hindu undivided family - Assessable as - Manager of assessee - HUF was partner in firm representing family - He received certain remuneration for rendering services to partnership firm - Whether since there was no real and sufficient connection between investment of HUF's assets and remuneration received by manager of HUF, remuneration so received by him was his individual income and it could not be included in total income of assessee-HUF - Held, yes FACTS The manager of the assessee-HUF, was admitted as representing the family to a partnership. Under the terms of the partnership he was entitled to a monthly allowance for 'rendering service' to the partnership. In the assessment proceedings of the HUF, the ITO rejected the contention that the remuneration paid to him was his individual income. The order was confirmed in appeal by the AAC and, in second appeal, by the Tribunal. The High Court affirmed the order of the Tribunal. On appeal to the Supreme Court: HELD The manager of the family was 'a working partner' and he was allowed a salary at certain rate. There was no evidence on the record that the remuneration agreed to be paid was not for services rendered to the partnership. It was true that, in the partnership, he represented his undivided family. The share in the profits of the partnership might on that account be regarded as the income of the HUF. There could be no doubt that the income received by him was remuneration for services rendered by him and there was no real and sufficient connection between the investment of the joint family assets and the remuneration paid to him. Therefore, the remuneration received by the karta of the assessee HUF, for services rendered to the firm in which he was a partner representing the interests of the assessee-HUF was not rightly included in the total income of the assessee-HUF. Note : The case was decided in favour of the assessee. CASE REVIEW Decision of the Punjab High Court (at Delhi) in Prem Nath v. CIT [1967] 63 ITR 795 (FB)(Punj.), reversed. CASES REFERRED TO CIT v. Gurunath V. Dhakappa [1969] 72 ITR 192 (SC), CIT v. D.C. Shah [1969] 73 ITR 692 (SC), V.D. Dhanwatey v.…

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