COMMISSIONER OF INCOME TAX Vs. DINESHCHANDRA SUMATILAL

JUDGEMENT

(1.) THE assessee in this case is the Hindu undivided family of which one Dineshchandra Sumatilal is the karta. The assessment years involved are assessment years 1968 -69 and 1969 -70, the relevant previous years being calendar years 1967 and 1968.

(2.) DINESHCHANDRA , the karta, is the son of one Sumatilal Maganlal. It appears that Sumatilal was the permanent director of Panalal Silk Mills Ltd., along with three other persons. The articles of association of the said mill company made a provision in article 99 relating to the vacancies to be filled in the office of the permanent director. The aforesaid article 99, which is material, may be set out in extenso :

(3.) IN the course of proceedings for assessment to income -tax of the Hindu undivided family the question arose as to whether the remuneration received by Dineshchandra for the services rendered to the mill -company was liable to be taxed in the hands of the Hindu undivided family. It was contended on behalf of the assessee that the remuneration received by Dineshchandra was in consideration of the services rendered by him to the mill -company and that it was his individual income with which the Hindu undivided family had no concern. The Income -tax Officer rejected this contention holding that : (1) Dineshchandra was made a permanent director by virtue of the shareholding which was the asset of the Hindu undivided family; (2) whatever income he earned as a permanent director was by virtue of the expoitation of the Hindu undivided family property in the shape of such shareholding; and (3) he did not in his individual capacity hold even a single share in the mill -company. Having regard to the findings aforesaid, the Income -tax Officer taxed the remuneration received by Dineshchandra from the mill -company in the hands of the Hindu undivided family.