Case: K.S. Subbiah P-Illai Vs. The Commissioner Of Income Tax

1. In these appeals filed by the assessee, which is a HIndu Undivided Family, we are concerned with the Assessment Years66 and1. The question that we are required to consider reads thuson the facts and in the circumstances of the case, the remuneration and commission received by Sri K.S. Subbiah Pillai was assessable in the hands of the assessee Hindu Undivided Familymay be mentioned at the outset that the same assessee was assessed in Andhra Pradesh for the Assessment Years9. The same question arose in regard to those assessments. The question was answered on reference by the High Court of Andhra Pradesh in favour of the assessee and the Revenue did not carry the matter further.

Reasoning: 3. The High Court, having analysed the law, rightly concluded that the broad principle that emerged was whether the remuneration received by the coparcener was in substance 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 compensation made for services rendered by the individual coparcener. If it was the former, it was the income of the HUF; but if it was the latter, then it was the income of the individual coparcener.4. We cannot agree. Having analysed the law, as it did correctly, the High Court should have taken note of the finding recorded by the Tribunal and noticed by it earlier, namely, that the remuneration and commission that were earned by the Karta were earned by him on account of his personal qualifications and exertions and not on account of the investment of the family funds and, therefore, should have held that the income could not be treated as the income of the HUF.