9911796707
TMI Blog1965 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... 1948, a partition of the properties and the businesses of the family was made among the six branches and as a result of that partition a sixth share was allotted in the assets partitioned to the smaller Hindu undivided family of which Mathura Prasad was the manager. After partition of the joint family estate, the managers of the six branches entered into an agreement of partnership to carry on in the name of Badri Prasad Jagan Prasad the businesses which were formerly conducted on behalf of the larger Hindu undivided family. By clause 8 of the partnership agreement, it was provided : "That the business of a place shall be managed by one of the members who reside at a place of the business to the best of his or their ability. The allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rasad as an individual was liable to be taxed in the hands of the Hindu undivided family and directed inclusion of that amount in the assessment of the Hindu undivided family of Mathura Prasad. The order passed by the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal. The appellant then applied under section 66(1) of the Indian Income-tax Act, 1922, for an order referring the following question to the High Court for its opinion : " Whether, on the facts and in the circumstances, the sum of Rs. 21,000 (received by Shri Mathura Prasad as salary from Agarwal Iron Works, Agra) was the income of the assessee family or Shri Mathura Prasad in his personal capacity ? " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership business. In Kalu Babu Lal Chand's case one Rohatgi, manager of a Hindu undivided family, who took over a business as a going concern, promoted a company which was to take over the business. The articles of association of the company provided that Rohatgi would be the first managing director at a remuneration specified in the articles. The shares which stood in the name of Rohatgi and his brother were acquired with funds belonging to the joint family and the family was in enjoyment of the dividends paid on those shares, and the company was floated with funds provided by the family, and the company was at all material times financed by the family. In proceedings for assessment of the Hindu undivided family, it was claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership profits, and such profits would be assessable as income in the hands of the Hindu undivided family. The court then proceeded to consider whether that principle was applicable to the income derived by a manager as a partner of a managing agent to remuneration received by the manager as the managing director of the company, and held that if the manager was appointed a managing director as representing the Hindu undivided family, the income received would be taxable as the income of the Hindu undivided family. It was observed at page 130 : " The articles of association of the company provided for the appoint ment as managing director of the very person who, as the karta of the family,had promoted the company. The acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allowance for the services rendered. There was in the view of the Tribunal an inseparable connection between the joint family funds and the allowance received. The right to draw the allowance therefore arose direcly from the joint family funds. It may be recalled that in the second paragraph of clause 8 of the partnership agreement, though a monthly allowance of Rs. 1,500 was named as the amount which Mathura Prasad was entitled to withdraw, the amount was liable to be reduced, if the profits earned did not justify the withdrawals, and Mathura Prasad was bound to refund the excess of the withdrawals over his appropriate share in the profits. Therefore, by the agreement it was intended that subject to a maximum of Rs. 1,500 per month, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the family is able to enter into a partnership and to earn allowance, which he would not otherwise have been entitled to receive. The second contention needs no elaboration. It was suggested that Mathura Prasad earned the allowance sought to be brought to tax because of the special aptitude he possessed for managing the Agarwal Iron Works, and the allowance claimed by him was not earned by the use of the joint family funds. But no such contention was raised before the High Court. We have been taken through the petition filed in the High Court under section 66(2) of the Act, and there is no averment to the effect that Mathura Prasad had any special aptitude for management of the Agarwal Iron Works, and what was agreed to be paid to him w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
