BALAK RAM HUF Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961, in respect of the asst. year 1972 -73, at the instance of the assessee. The question referred reads as follows :

(2.) THE Tribunal in its order states that it was not in dispute that -(1) that the funds for the allotment of the shares in the company to Balak Ram (director) and his son, Vijay Kumar, were the funds of the assessee -HUF ; and (2) that the said revenue received by Balak Ram, the Karta of the assessee -HUF from the company in question has been taxed in the hands of the assessee -HUF right up to the accounting period relevant to the asst. year 1971 -72 and that this revenue received by Balak Ram along with other income of the assessee -HUF were being merged with each other. The history of the formation of the company also shows that out of the larger HUF, the smaller HUF formed the partnership and subsequently converted themselves into a limited company. Thus the respective shares of all concerned persons certainly belonged to the erstwhile larger HUF. It is in these circumstances and having regard to the fact that the articles of association of the company specifically provided for Balak Ram to be appointed as a director for life, the Tribunal ultimately concluded that the remuneration paid to the said Balak Ram belonged to the HUF. The relevant finding of the Tribunal is as follows :

(3.) WE do not find any error in the approach of the Tribunal. The finding is fully justified in view of the decision of the Supreme Court in P. N. Krishna Iyer vs. CIT [1969] 73 ITR 539 (SC). The relevant test had been propounded by the Supreme Court at page 545 as follows :