BHANDARKAR D N Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) UNDER s. 256(2) of the IT Act, 1961, the Tribunal has referred the following question:

(2.) THE assessees are three divided brothers. THEy became partners of two firms representing their respective joint families. THE firms were constituted as far back in 1962. Up to 1974, the partners were not drawing any remuneration for the services rendered by them in the firms. But, on March 31, 1974, the partners passed a resolution in the respective firms for payment of salary to each one of them w.e.f. April 1, 1974. THEy were accordingly paid remuneration more or less equal to the profitsharing ratio to which they are entitled under the deed of partnership.

(3.) THE answer to the question raised, in our opinion, is not complex. Nor is it far removed from certainties. THEre is a string of decisions of the Supreme Court on the similar question beginning with the case in CIT vs. Kalu Babu Lal Chand (1959) 37 ITR 123 and ending with the case in Raj Kumar Singh Hukam Chandji vs. CIT (1970) 78 ITR 33 (SC). In Krishna Iyer vs. CIT (1969) 73 ITR 539 (SC), Shah J., speaking for the Supreme Court, reviewed all the earlier decisions on the question of remuneration earned by a member of an HUF or as an officer of the company or the firm, and concluded thus :