DASAPPA D V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Bangalore Bench, has stated a case a referred under section 256(1) of the Income-tax Act, 1961, the following question of law as arising out of its order dated March 5, 1970, in Income-tax Appeals Nos. 186 and 187 (Bangalore) of 1969-70.

(2.) THE matters relate to the assessments for 1965-66 and 1966-67 of a Hindu undivided family assessed in the name of D. V. Dasappa. THE relevant accounting years are the ones ended March 31, 1965, and March 31, 1966. THE said D. V. Dasappa was the karta of the Hindu undivided family. He was a director in the Consolidated Coffee Estates Ltd. For the assessment years 1965-66 and 1966-67, he had received sums of Rs. 2,375 and Rs. 12,375, respectively, as director's sitting fees and commission. THE amounts so received for the assessment year 1966-67 were Rs. 1,000 and Rs. 10,348. In the return submitted by the assessee for 1965-66, the amounts received relating to that year had been included. But, by a letter dated October 10, 1966, addressed to the Income-tax Officer, it was contended that the amounts received as director's sitting fee and commission were not includible in the assessment of the Hindu undivided family and a revised return was submitted. A separate return was also filed in his individual states showing therein these two amount as being assessable as his individual income. Similarly, for 1966-67, a separate return was filed showing such receipts as individual income and contending that they were not includible in the total income of the Hindu undivided family. THE assessments for both the years came to be made on December 20, 1966.

(3.) ON further appeal to the Tribunal, the orders of the authorities below were upheld. The Appellate Tribunal referred to the rulings in V. D. Dhanwatey v. Commissioner of Income-tax and P. N. Krishna Iyer v. Commissioner of Income-tax and observed that applying the principle enunciated in those cases, both the sitting fees and the commission were to be included in the assessment of the Hindu undivided family. It observed that these items of income had been received by the assessee in his capacity as a director of the company and his directorship was secured with the aid of family funds. For the assessee the case in P. N. Krishna Iyer v. Commissioner of Income-tax was sought to be distinguished on the ground that in that case the business which originally belonged to the Hindu undivided family was taken over by a limited company and the karta was apointed as the governing director by virtue of the qualifying shares which were purchases with the aid of the family funds. But the Tribunal held that from a reading of the judgment it was clear that the conversion of Hindu undivided family business into a limited company did not weight with the court and it was the fact that the qualifying shares were purchased with the aid of the family funds which was considered as decisive of the issue. The argument advanced that the minimum number of qualifying shares required to be held by a directors was negligible being only 300 shares out of the total issue of 13,41,562 shares was held to lack substance. The Tribunal held :