K.S. SUBBIAH PILLAI vs. THE COMMISSIONER OF INCOME TAX

A B c D K.S. SUBBIAH PILLAI v. THE COMMISSIONER OF INCOME TAX MARCH 10, 1999 [S.P. BHARUCHA, S.S. MOHAMMED QUADRI AND R.C. LAHOTI, JJ.) Income Tax Act, 1922/lncome Tax Act, 1961 : Hindu Undivided Family-Remuneration and Commission eamed by Karta-lncome Tax Appellate Tribunal, recording a finding that the ·. remuneration and commission earned by Karta were 011 account of his personal qualifications and exertions-Held, the amounts cannot be treated as income of HUF. Appellant assessee, a Hindu Undivided Family was assessed in State of Tamil Nadu for the assessment years 1959-60 to 1965- 66, 1969-70 and 1970-71 and in the State of Andhra Pradesh for the assessment years 1966-67 to 1968-69. The question whether the remuneration and commis- sion received by the Karla was assessable in the hands of the assessee E Hindu Undivided Family, was referred to the High Court at Madras. A similar question was referred to the Andhra Pradesh High Court with regard to the assessment years 1966-67 to 1968-69. The Andhra Pradesh High Court answered the reference in favour of the assessee and the Revenue did not file any appeal in that case. The High Court at Madras F dissented from the view of the Andhra Pradesh High Court and held against the assessee. Aggrieved, the assessee filed the present appeals. Allowing the appeals, this Court HELD : 1.LThe broad principle that emerged, as rightly concluded G by the High Court, was whether the remuneration received by the copar- cener was in .substance one of the modes of return made to the family because of the investment of the family funds in the business or whether it was compensation made for services rendered by the individual copar- cener. If it was the former, it was the income of the HUF; but if it was the. H 'iatter, then it was the income of the individual coparcener. [982-C] 980 ..

Jr KS. SUBBIAH PILLAI v. C.l.T. (BHARUCHA, J.] 981

982 SUPREME COURT REPORTS [1999] 1 S.C.R. A fact-finding authority and, as it has itself noticed in the judgment under challenge, the Tribunal had held that the remuneration and commission received by the Karta of the HUF were earned by him on account of his personal qualifications and exertions and not on account of the investment of the family funds in the company and, therefore, could not be treated as the income of the HUF. B The High Court, having analysed the law, rightly concluded that the broad principle that emerged was whether the remuneration received by the coparcener was in substance one of the modes of return made to the family because of the investment of the family funds in the business or C whether it was compensation made for services rendered by the individual coparcener. If it was the former, it was the income of the HUF: but if it was the latter, then it was the income of the individual coparcener. Apply- ing this test, the High Court held, "There is absolutely no evidence to support the contention of the learned counsel for the assessee that the development of the business was due to any peculiar qualification or D experience on the part of the assessee. " We cannot agree. Having analysed the law, as "it did correctly, the High Court should have taken note of the finding recorded by the Tribunal and noticed by it earlier, namely, that the remuneration and commission E that were earned by the Karta were earned by him 011 account of his personal qualifications and exertions and not on account of the investment of the family funds and, therefore, should have held that the -income could not be treated as the Income of the HUF. In the result, the appeals are allowed. The judgment and order under p appeal is set aside. The question is answered in the negative and in favour of the assessee. No order as to costs. R.P. Appeals allowed. \.