TMI Blog1997 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... een the partners, is deductible from the share income, computed under section 67 of the Act, as the share of the Hindu undivided family which has the beneficial interest in the said partnership firm in which it is represented by that partner ?" The assessee is a Hindu undivided family. The assessee filed returns for the assessment years 1979-80 and 1980-81 and the Income-tax Officer completed the assessments rejecting the claim of the assessee to treat the payment of salary paid to Deenadayalan its karta was not liable to be assessed in the hands of the assessee. The claim of the assessee was that Deenadayalan was a partner in a firm as the karta of the Hindu undivided family but looked after the business and for the services rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning of the business and earning of the profit by the firm. He also found that Deenadayalan has engaged himself full time in the supervision of the business of the firm and there was an agreement for the payment of salary by the firm. In these circumstances, he came to the conclusion that the payment of salary did not have the character of any return or reimbursement to the individual of the funds invested by the family and N. Deenadayalan received salary by virtue of his personal exertion in the management of the affairs of the firm. The Appellate Assistant Commissioner, therefore, held that the salary paid to Deenadayalan was paid for the personal services rendered by him and it had no real and sufficient connection with the investment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged himself full time in the supervision of the business of the firm. The Appellate Tribunal also confirmed the finding of the Appellate Assistant Commissioner that the payment of salary was not in any way related to the funds invested by the Hindu undivided family in the firm. In this factual situation the question that has to be considered is whether the salary income received by Deenadayalan can be regarded as an income of the joint family. The test whether the salary received by a partner is the individual income or that of the joint family which he represents in the firm was the subject-matter of consideration in several decisions of the apex court as well as by this court and recently in Commissioner of Income-tax vs V. S. Thyagaraja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the family is a partner cannot be assessed as the income of the family unless there is a direct nexus between the investment of the funds of the family in the firm and the payment of the salary. Applying the principles laid down by the two decisions of this court we are of the opinion that there was no direct or immediate nexus or link at all between the investment of the funds by the family and the payment of salary to Deenadayalan. The salary was paid to Deenadayalan and it was paid without any detriment to the investment of the family funds in the firm. It is also relevant to notice that only because of the special skill or the personal exertion of Deenadayalan the salary was paid to him and the salary was paid for his personal exe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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