COMMISSIONER OF INCOME TAX Vs. RAMESWARLAL JUGALKISHORE

JUDGEMENT

(1.) IN IT Ref. Nos. 6, 7 & 8 of 1971 the following three questions respectively have been referred under S. 256(2) of the IT Act, 1961, hereinafter referred to as 'the Act'.

(2.) THE facts of the case are as follows :- The cases relate to the asst. yrs. 1956-57, 1959-60 and 1960-61 for which the relevant accounting periods are respective calendar years. The assessee Rameshwarlal Jugal Kishore is an HUF of which Jugal Kishore Saharia is the Karta. Jugalkishore Saharia became the Managing Director of Anandabari Tea Co. (P) Ltd. w.e.f 28th April, 1954. The assessee HUF was a constituent of a larger HUF under the name of Hanutram Rampratap which was partitioned on 16th Aug., 1955, that is after the appointment of Jugalkishore Saharia as the Managing Director on 28th April, 1954. On partition of the larger HUF 900 shares out of 1000 shares held by the larger HUF in the aforesaid company (Anandabari Tea Co. (P) Ltd.) were allotted to the assessee HUF. In the course of the assessment proceedings the ITO added the following as the income of the HUF. on account of Managing Director's remuneration and commission received by Jugalkishore Saharia from Anandabari Tea Co. (P) Ltd. :- MANAGING DIRECTOR

(3.) THE assessee then filed appeal before the Tribunal which after considering all the facts and circumstances of the case did not agree with the view taken by the AAC. The Tribunal found that even when the larger HUF of Hanutram Rampratap held the block of shares before partition Rameshwarlal Saharia, then Karta was the Managing Director and the remuneration derived by him was never included as the income of larger HUF. The Tribunal further found that Jugalkishore Saharia became the Managing Director by reason of recognition of his individual ability and not merely because the assessee HUF held these shares in the company and that there was no detriment to the family assets as the assessee HUF continued to receive the dividend income of its holding of shares. The Tribunal accordingly directed that the sums of Rs. 24,000/-, Rs. 30,000/- plus Rs. 5,445/- and Rs. 36,163/- on account of Managing Director's remuneration and commission in the asst. yrs. 1956-57, 1959-60 and 1960-61 respectively be deleted from the assessee's income.