TMI Blog1965 (2) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... y Nadar Firm, in which the Hindu undivided family consisting of himself and his sons was a partner through him as the karta is legal and correct? (2) Whether in this case a direction under section 33(5) should have been given to the Income-tax Officer to eliminate the salary paid to Sri Kathiresa Nadar in working out the share of income of the Hindu undivided family of which he was the karta? This reference relates to the assessment year 1959-60. The assessee is a registered firm composed of three partners, (1) A.S.K. Rathnaswamy Nadar, (2) R. Raja Sankaralingam and (3) A.S.K.R. Kathiresa Nadar, sharing the profits and losses equally. The first person is a partner in his individual capacity while the other two represent their resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered that this claim offended against the provision of section 10(4)(b) of the Act since Kathiresa Nadar was a partner of the firm. On appeal by the aggrieved assessee the Appellate Assistant Commissioner, taking the view that this remuneration was paid to Kathiresa Nadar not in his capacity as partner but as an employee of the partnership excluded it from the income of the partnership. On a further appeal the Appellate Tribunal reversed the decision of the Appellate Assistant Commissioner, the Tribunal being of the opinion that this case fell within the ambit of section 10(4)(b) of the Act. The Tribunal thought that so long as one of the contracting parties was a partner, section 10(4)(b) came into operation irrespective of the destinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner of the firm. It is manifest that this sub-section enacts an absolute prohibition. It does not limit the operation of the Act to a remuneration paid to a partner as such. It takes within its scope remuneration or salary paid to a partner in any capacity. We are not here concerned with the distinction between his role as a manager or karta of the joint family and his role as an individual. The only test that is relevant under section 10(4)(b) of the Act is whether the payment is made to a partner or not. We do not think that we can accede to the proposition of the learned counsel for the assessee that when a payment is not made to a partner as partner but in respect of the services rendered by him to the partnership it falls outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was ruled by a Division Bench that section 10(4)(b) makes no distinction between payments by way of interest, commission, salary or remuneration made to a partner as a partner and made to him in a different character and consequently the payments made to two of the partners were not permissible deductions. Mr. Srinivasan sought to distinguish this case on the ground that the two partners to whom the payments were made were proprietors of two independent concerns and not managers of joint Hindu families. We do not think that this is sustainable distinction. The judgment referred to applies with full vigour to the instant case. The following observations of the Patna High Court in Commissioner of Income-tax v. Jainarain Jagannath [1945] 13 I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividual who represented the family in the partnership. The learned judges were unconcerned with the applicability of section 10(4)(b) of the Act. We cannot, therefore, derive much assistance from these two decided cases. Gurunath v. Dhakappa v. Commissioner of Income-tax [1964] 53 I.T.R. 757 is of the same category and does not help us in finding a solution to the problem before us. On this discussion we are satisfied that the instant case is hit at by section 10(4)(b) and the Income-tax Officer was right in adding this sum of ₹ 6,000 paid to Kathiresa Nadar as salary to the gains and profits of the partnership. The first question is accordingly answered in favour of the department and against the assessee. As regards the second q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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