TMI Blog1983 (4) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... mother, claimed deduction under s. 37 of the I.T. Act of salary paid by it to Gopi Nath, the karta, for rendering service to it and looking after its business interest, etc. Although the AAC accepted the claim because: " Participation of minors is not essential for an agreement. The only point on which the Tribunal threw away the claim of salary was that the agreement was not a valid one. The Tribunal never expressed the opinion that the amount had not been paid for commercial expediency. The appellant's wife was certainly not a coparcener, but she was a member of the HUF. In the spirit of the two judgments quoted above, if carefully analysed, it will be seen that the claim of salary in the hands of the HUF is clearly an allowable expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family has shares except, of course, to see that he receives the share income from the various partnership firms. From this point of view, " we are not satisfied that the finding that the agreement is not dictated by any commercial expediency suffers from any error of law ". It is apparent that these observations were made to highlight the finding of fact recorded by the Tribunal. Deductibility of salary paid by an HUF to its karta, as an expenditure wholly and exclusively for business purposes under s. 37, I.T. Act, has two facets, one, whether deduction could be claimed even if the HUF did not carry on any independent business, second, whether such a claim can be made by the karta at all as he, by nature of his status, is under obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manage all business of the family without being entitled to remuneration ". It was held (p. 242): " There seems to be no reason why, if all persons competent in Hindu undivided family to enter into an agreement on its behalf consider it appropriate that the karta should be paid remuneration and enter into an agreement to pay remuneration to him, that remuneration should not be held to be an expenditure incurred in the interest of the family, and consequently an expenditure deductible under section 10(2)(xv) of the Act." But the condition precedent for such claim is that payment should be made under a valid agreement. It was so observed in Jugal Kishore's case [1967] 63 ITR 238 (SC). The Madras High Court in the case of Krishnasami Ayyan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entered into by a female. In other words, the defect was legal rather than factual In coming to the conclusion extracted above, the Tribunal appears to have mixed up the concept of coparcenary and joint Hindu family. The former is a narrower body and females are excluded from it. It is confined to male lineal descendants who acquire interest by birth. But a female can be a member of a joint family. (Mulla's Hindu Law, 14th Edn., para. 212). Necessary corollary of it is that a female who is a member of the HUF can enter into an agreement as well. In CIT v. Banaik Industries [1979] 1-19 ITR 282, 285, it was held by the Patna High Court: "A female is as good a member of an HUF as a male, of course, with certain limits, in the sense that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be sustained. In Shankerlal H. Dave's case [1980] 124 ITR 733, it was held by the Gujarat High Court, in more or less identical circumstances, that an agreement between the karta of the HUF and his wife, the only other member of the HUF, on her behalf and on behalf of her minor sons as next natural guardian was valid. It repelled the argument advanced on behalf of the Commissioner that the mother not being natural guardian of the minors during the lifetime of father was not competent to enter into agreement. The learned counsel for the Commissioner vehemently argued that the finding on the validity or otherwise of agreement was a finding of fact. And the assessee having not challenged it, the answer to the question raised must be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider it relevant for the assessment year in dispute. Learned counsel for the assessee argued that the assessee's accounting year was from July to July. And as one of the clauses of agreement provided that the agreement shall operate from 11th July, it shall be deemed to have come into effect on that date. The learned counsel urged that income accrues on the close of the year and the agreement of 1969 having been applied from 11th July, it was in operation on the date the accounting year closed. Therefore, the assessee was entitled to claim benefit under it which was not found to be invalid. We do not consider it necessary to decide this controversy at present, as it can be raised before the Tribunal which is being directed to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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