1994 (4) TMI 91

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..... t the services rendered by these two HUFs could not have been rendered by the kartas in their individual capacity the payment for such services is disallowable under s. 40A(2). 4. The CIT(A) ought not to have disallowed the payment of Rs. 48,000." 2. The assessee was carrying on the business of construction on contract basis. The firm paid commission aggregating to Rs. 48,000 to the two HUFs of the partners for supplying labour as well as material. The ITO recorded the statement of both the partners who were also kartas of the aforesaid two respective HUFs. In their respective statements both of them stated that the income by way of commission received by the HUFs from the partnership firm was the result of their respective personal exp .....

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..... page 361 the High Court has observed that the partnership was brought into existence by the deed of partnership which contained a clear intention in the form of a declaration in the recital of that partnership deed saying that the assessee held the share of profit in his capacity as manager of the HUF. On the construction of that recital mentioned in the deed the Hon'ble High Court answered the reference that whether or not the moneys invested by the assessee in the business came out of the funds belonging to the HUF, the recital in the deed of partnership together with the fact that the partnership had functioned is sufficient to lead to the inference that the share of profits was received by the assessee as the manager of the HUF. Such a .....

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..... ri P.I. Pandya. The Hon'ble Supreme Court in the case of Rajkumar Singh Hukam Chandji vs. CIT (1970) 78 ITR 33 (SC) has held that in determining whether the remuneration received by an individual is the income of the individual to whom it is purported to have been given or that of the HUF of which he is coparcener, the test is whether the remuneration received by the coparcener in substance, though not in form, was but one of the modes of return made to the family because of the investment of the family funds in the business or whether it was a compensation made for the services rendered by the individual coparcener. If it is the former, i.e., the return for investment of the family it is income of the HUF but if it is the latter i.e. compe .....

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