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TMI Blog1973 (10) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ts for 1965-66 and 1966-67 of a Hindu undivided family assessed in the name of D. V. Dasappa. The relevant accounting years are the ones ended 31st March, 1965, and 31st March, 1966. The said D. V. Dasappa was the karta of the Hindu undivided family. He was a director in the Consolidated Coffee Estates Ltd. For the assessment years 1965-66 and 1966-67, he had received sums of Rs. 2,375 and Rs. 12,375, respectively, as director's sitting fees and commission. The amounts so received for the assessment year 1966-67 were Rs. 1,000 and Rs. 10,348. In the return submitted by the assessee for 1965-66, the amounts received relating to that year had been included. But, by a letter dated 10th October, 1966, addressed to the Income-tax Officer, it was contended that the amounts received as director's sitting fee and commission were not includible in the assessment of the Hindu undivided family and a revised return was submitted. A separte return was also filed in his individual status showing therein these two amounts as being assessable as his individual income. Similarly, for 1966-67, a separate return was filed showing such receipts as individual income and contending that they were not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the family was an insignificant proportion of the total issued share capital of the company (13,41,562 shares) and although the income from the shares was income of the family and the shares were necessary for acquiring qualification as director, there was no detriment to the joint family funds and no part of the joint family funds were spent or utilised for acquiring the director's commission and the sitting fees and these amounts could not be included in the total income of the Hindu undivided family. Several rulings were relied upon for the assessee in regard to the principle to be applied and in particular the decision of the Supreme Court in S. RM. CT. PL. Palaniappa Chettiar v. Commissioner of Income-tax. The Appellate Assistant Commissioner was of opinion that the facts and circumstances in the cases relied on for the assessee were distinguishable from those in the instant cases. He referred to the decision of the Supreme Court in V.D. Dhanwatey v. Commissioner of Income-tax, and P. N. Krishna Iyer v. Commissioner of Income-tax and held that, although the two items of income can be traced to the individual skill and experience of the karta as a coffee planter, they were ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of this court in V. C. Rajarathnam v. Commissioner of Income-tax, and it is urged that the conclusion reached that the income by way of sitting fees and commission was includible in the total income of the Hindu undivided family merely on the ground that the qualifying shares were purchased out of the family funds is not tenable. For the department it is argued that the facts and circumstances in the instant cases are similar to those in P. N. Krishna Iyer v. Commissioner of Income-tax and the conclusion reached is correct. Before proceeding further, we should point out that in the questions as framed by the Tribunal there has been a mix up of the amounts in relation to which they have been referred. The receipts by way of sitting fees in the two years 1965-66 and 1966-67, respectively, were Rs. 2,375 and Rs. 1,000 and by way of commission, Rs. 12,375 and Rs. 10,348. Only the total of the two items in the respective two years was Rs. 14,750 and Rs. 11,348. Therefore, the questions referred obviously relate to a sum of Rs. 1,000 and Rs. 10,348 in respect of the assessment year 1966-67 and to a sum of Rs. 2,375 and Rs. 12,375 in respect of the assessment year 1965-66. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily treated as joint family income merely because the qualifying shares had been purchased out of the family funds ; but in such cases, the fee, salary or other remuneration received by the karta as a director or partner, though it may be partially traceable to the personal exertions of the member, should be held taxable as the income of the family if : (1) it is earned by detriment to the family funds ; (2) it is earned with the aid or assistance of those funds ; or (3) there is a real connection between the income and the investment of the family funds. From the facts in Dhanwatey's case and Krishna Iyer's case it is apparent that there was a real connection between the income received by the karta as a director or partner and the investment of the family funds and, therefore, it was held that the income of the director or partner should be held taxable as the income of the family. In Palaniappa Chettiar's case there was no such connection. " The decision of the Supreme Court in Raj Kumar Singh Hukam Chandji's case was rendered on 1st August, 1970. Therein, after noticing the earlier rulings and discussing the facts and circumstances in those cases, it was laid down : " . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company of stability and standing cannot be said to be to the detriment of the family funds where no risk is involved. Dividend was received in respect of the shares and there was no dispute that it belonged to the Hindu undivided family as it was directly traceable to the investment of the Hindu undivided family. On the facts and circumstances of the case, it cannot be said that the source of receipt of the sitting fees and commission was the investment. The source was the individual skill and experience of the karta as a coffee planter. These receipts were essentially a remuneration for the services rendered by the karta and his individual income and the mere fact that the qualifying shares were acquired from out of the family funds would not change their character. The reliance sought to be placed on the decision in P. N. Krishna Iyer v. Commissioner of Income-tax for the department can be of no avail. The facts and circumstances in that case were entirely different and distinguishable from those in the instant cases. We, therefore, hold that the Tribunal was wrong in holding on the facts and circumstances in the case that the sitting fees and commission received by the karta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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