A K THIAGARAJAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question raised is common in all these tax cases, though the petitioners are different. THE question that has been referred to us by the Tribunal is :

(2.) THE admitted facts, as set out in the statement of the cases are : THE assessees are six Hindu undivided families whose kartas are partners in a firm R. M. Appavoo Chettiar Sons, Madurai. THE firm paid remuneration to the kartas as there was provision for such payment being made in the partnership deed. THEre was one other partner in the firm who was not paid any remuneration. Up to the assessment year 1980-81, the salary paid to them was at the rate of Rs. 9,000 per year. That was increased to Rs. 24,000 per year from the assessment year 1981-82 by a supplementary deed executed by the parties. THE payment of salary at the rate of Rs. 9,000 per year for the years prior to 1981-82 had been the subject-matter of appeal before the Tribunal and it was held by the Tribunal that the said payment was not hit by Section 40(b) of the Income tax Act as the payment was for services rendered by the partners who possess special skill and knowledge and the partnership deed permitted the payment of such salary.

(3.) THE question referred to us as it now reads proceeds on the assumption that what was paid in fact, was salary and the issue is only as to whether the increase in the salary is to be assessed in the hands of the Hindu undivided family or in the hands of the individuals who are partners in the firm. This question, does not really bring out the real controversy. THE statement of the case submitted by the Tribunal shows that the Income-tax Officer regarded this amount as distribution of the profits to the partners and therefore, to be included in the total income of the Hindu undivided family, whose kartas were the partners. THE Tribunal, though it referred to that order of the Income-tax Officer, in the course of its order did not record any finding that this was an attempt to divert the profits of the firm.