TMI Blog1985 (10) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant assessment years. He was appointed as managing director of the company by an agreement on May 7, 1960, for a period of five years, vide the resolutions of the board of directors of the said company. It was resolved in the resolutions that " the company should engage and employ Shri Pannalal Kothari as managing director who should serve the said company on the said terms and conditions herein set forth ........ " According to clause (1) of the agreement, it was provided that the company shall employ Seth Pannalal as its managing director who shall serve and act as manager of the said company for a period of five years on a remuneration of Rs. 2,000 per month plus free use of the company's car with effect from January 1, 1960, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Sohan Lal. The aggregate of the remuneration thus credited in the books of the aforesaid firm was, at the end of the year, transferred to the profit and loss account of the firm. After deducting the shop expenses, motor expenses, salary, etc., whatever remained, was divided equally amongst the partners of the said firm in equal shares. The net profit as per the profit and loss account of the aforesaid firm, which remained with the firm for distribution amongst the partners during the years under consideration, was as below: Assessment year Amount Rs. 1962-63 12,229 1963-64 12,974 1964-65 12,042 1965-66 14,451 The aforesaid firm had come into existence with effect from April 18, 1959, as a result of the partition in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Lalchand as the first managing director of the company in July, 1959. Shri Lalchand worked as managing director of the company for a brief period from July, 1959, to December 24, 1959, on which date he died. After his death, Pannalal, the present assessee, was appointed as managing director. On the basis of the above facts and the history of the case, the Income-tax Officer was of the opinion that the income from remuneration derived by Pannalal as managing director of the company was his personal income and the assessment was made accordingly. The appeal filed by the assessee was dismissed by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal also upheld the order of the Appellate Assistant Commissioner. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered by a coparcener, the circumstance that his services were availed of because of the reason that he was a member of the family which had invested funds in that business or that he had obtained the qualification shares from out of the family funds would not make the receipt the income of the Hindu undivided family. " Applying the above test to the facts of the present case, it would be evident that the assessee was appointed as managing director in his individual capacity. He was bound to attend diligently, faithfully and honestly to the business of the company to the best of his ability and skill possessed by him. According to the clauses in the agreement, the managing director was authorised to appoint and dismiss office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a return to him on account of any investment made by the firm and it cannot be considered an investment in the same manner which may bring any dividend or interest on such investment. Even if the brothers had voted for appointment of Pannalal, it was not on account of any detriment to the shares held by them and in this view of the matter, it cannot be said that the brothers had made any investment in the company and the managing director's remuneration was fixed on account of a return from such investment. In view of these circumstances, we agree with the view taken by the income-tax Appellate Tribunal in the present case and the question of law referred to above is answered in the affirmative and in favour of the Revenue, The partie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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