TMI Blog1969 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 1960-61 and the relevant accounting periods are Samvat years 2014 and 2015. The assessee through its karta, Shri D. C. Shah, was a partner in the firms of (1) M/s. C. U. Shah and Co. and (2) M/s. Oriental Can Manufacturing Co. as per terms and conditions set out in the instruments of partnership dated 5th June, 1961, and 11th September, 1957. Shri D. C. Shah was paid a remuneration of Rs. 12,000 per year for both the assessment years by M/s. C. U. Shah and Co. He was paid Rs. 10,000 for the assessment year 1959-60 by the Oriental Can Manufacturing Co. The amounts received by Shri D. C. Shah were shown by the assessee in its returns of income along with balance of the share income from the aforesaid firms. The Income-tax Officer in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d managing partner shall be paid Rs. 1,000 (rupees one thousand only) per month in addition to all other benefits that he is entitled to enjoy as a partner of the firm. 9. The said managing partner shall continue to be the managing partner for his lifetime or his retirement whichever is earlier. 10. All other partners shall devote as much time to the furtherance of the partnership business as they think proper, necessary and advisable. " Clauses 14, 15 and 16 of the instrument of partnership dated 11th September, 1957, are to the following effect : 14. The partner No. 2 shall be the managing partner for conducting the said business free from any interference of whatsoever nature by others. The said managing partner shall manage, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id should be included in the total income of the assessee. At the instance of the assessee, the Income-tax Appellate Tribunal stated a case to the High Court on the following question of law : " Whether, on the facts and in the circumstances of the case, was the salary received by D. C. Shah from the two firms of M/s. C. U. Shah Co. and M/s. Oriental Can Manufacturing Co. includible in the assessment of the Hindu undivided family of which Shri D. C. Shah was the karta? " The High Court, relying upon its earlier decision in Gurunath V. Dhakappa v. Commissioner of Income-tax, held that the salary received by Shri D. C. Shah from the aforesaid firms cannot be included in the assessment of the Hindu undivided family of which he was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness and " there was a real and sufficient connection between the investment from the joint family funds and the remuneration paid to V ". It was therefore held by this court that the salary paid to V was rightly assessed as the income of the Hindu undivided family. In M. D. Dhanwatey v. Commissioner of Income-tax, the facts were parallel to the facts in V. D. Dhanwatey's case and the salary received by the karta of the Hindu undivided family was treated as the income of the family. In S.RM. CT. PL. Palaniappa Chettiar v. Commissioner of Income-tax, the material facts were different. The karta of a Hindu undivided family acquired 90 out of 300 shares in a transport company with the funds of the family. In course of time he became the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to become a member of the company were purchased with the aid of the joint family funds. The shares which were allotted to the assessee in lieu of his services were also treated as shares belonging to the joint family. The entire capital assets of the company originally belonged to the joint family and were made available to the company in consideration of a mere promise to pay the amount for which the assets were valued. The income was primarily earned by utilising the joint family assets or funds and the mere fact that in the process of gaining the advantage an element of personal service or skill or labour was involved did not alter the character of the income. In cases of this class the character of the receipt must be determined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging partner. After the said Shri Dhote retired Shri D. C. Shah was appointed as the managing partner during the assessment year 1959-60. Clause 15 of the partnership deed provided for such an appointment. A reading of clauses 14, 15 and 16 of the partnership deed indicates that the remuneration was paid for the specific acts of management done by Shri D. C. Shah resting on his personal qualification and not because he represented the firm. It should also be noticed that no other partner was paid any salary. Upon the particular facts of this case, it is manifest that there was no real or sufficient connection between the investment of the joint family funds and the remuneration paid by the partnership to Shri D. C. Shah. It follows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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