Case: M/s. Piyare Lal Adishwar Lal Vs. Commissioner of Income Tax, Delhi

pay the price. Counsel for the respondent also relied on Commissioner of Income-tax. West Bengal v. Kalu Babu Lal Chand, (1959) 37 ITR 123 : (AIR 1959 SC 1289 ) where the Managing Directors remuneration was held to be the income of a joint family to be assessed as such in its hands. That case is distinguishable. There the karta of a Hindu undivided family took over a business as a going concern and carried on the business till the company was incorporated. The shares in the name of karta and his brother were acquired with the funds of the joint family. The company was floated with the funds of the joint family and was financed by it and the remuneration received was credited in the Managing Director itself was assignable. The Articles of Association provided that the karta or his assigns or successors in business "whether under his name or any other style or firm" would be the Managing Director of the Company and he was to continue for life until removed because of fraud or dishonesty. Thus the acquisition of business, the floatation of the Company and the appointment of the Managing Director were inseparably liked together. The facts of that case were quite different from that of the present case which are akin to the facts in 1955-1 SCR 1427 : ((S) AIR 1955 SC 404 ).14. The next question for decision is whether the salary of Sheel Chandra as Treasurer of the Bank is assessable as part of the income of Hindu undivided family of which he is the karta or as his separate income. Both the Appellate Tribunal and the High Court were of the opinion that the emoluments as Treasurer were not acquired without detriment and risk to the family property and therefore formed part of the income of the Hindu undivided family. Treasurership is an employment of responsibility, trust and fidelity, and personal integrity and ability and mere ability to furnish a substantial security is not the sole or even the main reason for being appointed to such a responsible post in a Bank like the Central Bank of India. On the other hand his previous experience as an Overseer of the Bank and his being appointed on his applying for the post are indicative of personal fitness for it.15.There is nothing to show that Sheel Chandra had received any particular training at the expense of the family funds or his appointment was the result of any outlay or expenditure of or detriment to the family property. But it was argued on behalf of the respondent that because he had lodged joint family property by way of security his earnings as Treasurer became a part of the income of the Hindu undivided family for the reason that the acquisition was not without risk to the family estate.He relied on Gokul Chand v. Firm Hukum Chand Nath Mal, 48 Ind App 162: (AIR 1921 PC 35), and 1959-37 ITR 123 : (AIR1959 SC 1289). In the former case a member of the joint family entered the Civil Service and that was made possible by the expenditure of family funds which enabled him to acquire the necessary qualifications and it was that fact which made his earnings part of the family income. The following passage in that judgment at p. 168: (of Ind App): (at p. 37 of A. I. R.), was emphasised:"It may be said to be direct in the one case and remote in the other, but if risk or detriment to family property is the point in both cases, there appears to be no such merit in "science", recognised by the sages of the Hindu law, as would warrant the exclusion of gains of science as such from the category of partible acquisitions."Counsel particularly relied on the words "risk of" and contended that by reason of the family property being given in security, the risk as understood in that judgment had arisen; because it became liable for any loss that might be incurred during the course of employment of Sheel Chandra. The word risk in that judgment must be read in the context in which it was used. Family estate was used and expenditure was incurred for equipping one of its members to join the Indian Civil Service. It was in that connection that the words risk of or detriment to family property were used. The latter case, Kalu Babu Lal Chands case (1959) 37 ITR 123 : (AIR 1959 SC 1289 ), has already been discussed. The facts and circumstances of that case were different.16. The cases which the Privy Council relied upon in Gokul Chands case, 48 Ind App 162: (AIR 1921 PC 35), were all cases where joint family funds had been expended to fit a member of the joint family for the particular profession or avocation the income of which was the subject matter of dispute but the respondents were not able to refer to any decision in which it was held that the mere fact of giving joint family property in security for the good conduct of a member of the family employed in a post of trust was sufficient to make the emoluments of the post joint family property because of any detriment to family property or risk of loss. It has not been shown that in this case there was any detriment to the family property within the meaning of the terms as used in decided cases.17. In our opinion the judgment of the High Court was erroneous on both questions which were referred to it and they should both have been decided in favour of the appellant.18. The emoluments received by Sheel Chandra were in the nature of salary and therefore assessable under S. 7 of the Income-tax Act and not under S. 10 of the Act as profits and gains of business and the salary was the income of the individual i.e., Sheel Chandra and not the income of the Hindu undivided family.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is true that as Treasurer, Sheel Chandra had also undertaken to indemnify the Bank not only for his own default but also for the default of the members of the Cash Department Staff. But Banks have to deal with monies, valuable securities gold and other valuables and must necessarily employ servants whose honesty is guaranteed and it is necessary for the Bank to have some one in its employment who can perform these duties in a responsible manner and be answerable to the Bank for negligence and default in the performance of this class of work. In the very nature of things one man cannot do all this work, not even at one branch, what to say of several branches; other people have therefore to be employed and although the persons employed in the Cash Department are servants of the Bank they do the work which Treasurers ordinarily and customarily do and consequently the treasurer is made responsible for any damage which the Bank suffers due to the default of the Treasurer or of those employed to do the work of the Cashthe Appellate Tribunal and the High Court were of the opinion that the emoluments as Treasurer were not acquired without detriment and risk to the family property and therefore formed part of the income of the Hindu undivided family. Treasurership is an employment of responsibility, trust and fidelity, and personal integrity and ability and mere ability to furnish a substantial security is not the sole or even the main reason for being appointed to such a responsible post in a Bank like the Central Bank of India. On the other hand his previous experience as an Overseer of the Bank and his being appointed on his applying for the post are indicative of personal fitness for it.In our opinion the judgment of the High Court was erroneous on both questions which were referred to it and they should both have been decided in favour of the appellant.18. The emoluments received by Sheel Chandra were in the nature of salary and therefore assessable under S. 7 of the Income-tax Act and not under S. 10 of the Act as profits and gains of business and the salary was the income of the individual i.e., Sheel Chandra and not the income of the Hindu undivided family.