GOPI NATH SETH Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question of law for the opinion of this court under Section 256(1) of the I.T. Act, 1961 :

(2.) Deductibility of salary paid by an HUF to its karta, as an expenditure wholly and exclusively for business purposes under Section 37, I.T. Act, has two facets, one, whether deduction could be claimed even if the HUF did not carry on any independent business, second, whether-such a claim can be made by the karta at all as he, by nature of his status, is under obligation to look after the interest of family including the business without any remuneration. And both these aspects have been put beyond controversy by the Supreme Court.

(3.) The first aspect came up for consideration in CIT v. Ramniklal Kothari [1969] 74 ITR 57 (SC). It was held that profits earned by a person by himself or in partnership with others was income under Section 10 of the Act of 1922 and any expenditure incurred for earning it was deductible under Section 10(2) of the Act as business expenditure. It did not approveof the view of the Calcutta High Court in Ishwardas Subhkaran v. CIT (ITR No. 38 of 1952, decided on June 2, 1953), that salary paid to a munim to look after the interest of the assessee, an HUF, which entered into a partnership agreement with third parties to run a rice mill, which could not be attended to by any member personally, was not deductible.