COMMISSIONER OF INCOME TAX Vs. K V SOMASUNDARAM

JUDGEMENT

(1.) IN this reference petition, the Revenue seeks a direction from this court to the Tribunal to refer the following question for the opinion of this court."Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the salary received by K.V. Somasundaram as a managing partner in Messrs.K. V. Somasundaram& Co. should be assessed in the hands of the Hindu undivided family, even though the assessee is represented in the firm as the karta of his Hindu undivided family ?"

(2.) AFTER hearing the counsel on both sides at some length and after going through the order of the Tribunal, we do not think that any referable question arises out of the order of the Tribunal. The assessee is the karta of a Hindu undivided family and in that capacity, he was a partner in partnership firm by name Messrs.K. V. Somasundaram& Company. The share income from the firm was assessed in the hands of the assessee as the karta of the Hindu undivided family. For the assessment year 1978-.79, the assessee while filing the return of income of the Hindu undivided family with reference to the share income from the firm excluded a sum of Rs. 12, 000 representing the salary paid to him on the ground that it represented his individual income.

(3.) THE third partner has not been paid any amount apart from the share income due to him as per the partnership deed. THE fact that the third partner is to merely receive a share of income and is not entitled to any other amount apart from the share of income, will clearly indicate that the extra payment made to the other two partners apart from their share of income, can only be for the services rendered by them. THE extra payment is not made to the said partners merely because they are partners of the firm. If that is so, the third partner also has to be paid some amount. But since the third partner has not been paid any amount, the payment made to the other two partners can only be for the services rendered by them to the firm, one as the managing partner of the firm and the other as the person attending to the day to day business of the firm. Merely because the Tribunal has not considered the nature of the functions performed by the assessee to the firm, it is not possible to construe the monthly payment of Rs. 1, 000 to the assessee as relatable to the shareholding as the karta of the Hindu undivided family. If a person is entrusted with the overall management of a firm and its business by designating him as the managing partner, it can easily be assumed that such a partner has to necessarily manage the affairs of the firm. It is not the case of the Revenue in this case that though the assessee has been designated as the managing partner, he did not attend to any work connected with the overall management of the firm and its business and that some other person was attending to the same.