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1949 (11) TMI 14

anarayana Rao, J. This reference raised a very plain question, viz., whether in the circumstances and on the facts of this case, the two sums of ₹ 18,991 and ₹ 105 received by the respondent as managing director's remuneration and director's sitting fees from the Indo-Commercial Bank could be said to be a part of the income of the Hindu undivided family of which he was the karta. The assessment was made on the basis that the family of which Mr. Sankaralinga Ayyar was the karta or the manager was an undivided Hindu family. For the assessment year 1943-44 Mr. Sankaralinga-Ayyar claimed that the remuneration of ₹ 18,991 which he received as the managing director of the Indo-Commercial Bank and a sum of ₹ 105 whi .....

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learned counsel. The remuneration of the managing director is earned by him in consideration of the services which he rendered to the Bank. No part of the family funds were spent or utilised for acquiring this remuneration, except that the necessary shares to acquire the qualification of a managing director were purchased out of the joint family funds. There is no detriment to the family property in any manner or to any extent as admittedly the shares earn dividend which is included in the income of the family. Under Hindu Law, the remuneration of the managing director whose employment is in the nature of a contract of service would ordinarily be his self-acquisition and unless the earnings are thrown into the common stock or, in other word .....

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lows:- ''The D Company transferred certain shares which it held in the K Company to C, one of its directors, in order to qualify him to become a director of the K Company, the intention being that C should represent the interests of the D Company on the board of the K Company, and C executed a declaration of trust of the shares in favour of the D Company: Held, that the remuneration received by C as director of the K Company was not profit received by him from the use of the property of the D Company, and that C was under no liability to account for that remuneration to the D Company." The peculiar feature of this case is that C executed even a declaration of trust of the shares in favour of the D Company. Notwithstanding this .....

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iswanatha Sastri, J.-I agree. By virtue of his position as the holder of a large number of shares, Mr. Sankaralinga Ayyar became eligible for appointment as the managing director of the Indo-Commercial Bank. But his actual appointment and his remuneration were the result of a contract of service entered into between him and the Bank and not of the holding of shares by him. He was entitled to be paid and was paid remuneration for service rendered by him to the Indo-Commercial Bank under a specific contract entered into by him with the Bank. The mere fact that he held a particular quantity of shares as manager of a joint family did not ipso facto enable him to function as the managing director. His personal qualifications were mainly responsi .....

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