Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Individual - Assessable as - Assessee was karta of HUF - He received certain commission under managing agency agreement - Whether in view of fact that rights under managing agency agreement were not acquired by utilizing any portion of HUF property nor were they acquired on behalf of HUF, commission so received by assessee under agreement was to be treated as his individual income and not income of HUF - Held, yes FACTS In 1932, 'M' and his brother 'C' entered into a managing agency agreement with the 'D' Ltd., whereunder 'N' the firm of which the two brothers were partners, was appointed managing agents of the company subject to certain conditions and rights enumerated in the agreement. The two brothers, at the time when the agreement was entered into, were admittedly members of a Hindu undivided family. In 1941, the two brothers, 'M' and 'C', became divided and the partition was evidenced by a partition deed of that date. The partition deed made no reference to the rights under the managing agency agreement; nor was there any fresh agreement after partition between the 'D' Ltd. and the firm. The firm continued to manage the company and in the year of account 1942-43, 'M', for his share of the managing agency commission, obtained certain sum. That sum was treated by the ITO as income of the joint family and was assessed as such overruling the objection of 'M' that it was really his individual income and should not have been included in the income of the joint family. That decision was upheld by the AAC and also by the appellate Tribunal. On reference: HELD The agreement was entered into in 1932 when 'M' and 'C' were undivided and there was nothing to indicate in the document that it was entered into on behalf of, and for the benefit of, the family. The indication, if any, pointed to an opposite conclusion for the reason that when the karta of the family at that moment was 'M', who was the senior of the two brothers, the agreement was entered into in the name of the two brothers, which negatived any presumption that the agreement was entered into on behalf of…

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