M/S. PIYARE LAL ADISHWAR LAL vs. THE COMMISSIONER OF INCOME-TAX, DELHI.

CIVIL APPEAL No. 123/1957Supreme Court[1960] 3 S.C.R. 66926 April 1960Bench: 3 JudgesAuthor: S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH12 pages
AI SummaryAllowed

What were the facts?

The assessee is a Hindu Undivided Family (HUF) with Sheel Chandra as its Karta. The assessment year in question is 1951-52. The dispute concerns the taxability of Rs. 23,286 received by Sheel Chandra as Treasurer of the Central Bank of India. Sheel Chandra's father was previously the Treasurer. Sheel Chandra was appointed Treasurer after serving as an Overseer in the same bank. As Treasurer, he furnished security to the bank using properties of the HUF. The Income-tax authorities, including the Income-tax Appellate Tribunal, held that these emoluments were profits and gains of business and part of the HUF's income, not Sheel Chandra's individual salary. The High Court upheld this view.

What did the Supreme Court hold?

The Supreme Court held that the emoluments received by Sheel Chandra as Treasurer were in the nature of salary and therefore assessable under Section 7 of the Indian Income-tax Act, 1922, and not under Section 10 as profits and gains of business. The Court found that the agreement indicated a master-servant relationship, making Sheel Chandra a servant of the Bank. Regarding the second issue, the Court held that the emoluments were the individual income of Sheel Chandra and not the income of the Hindu Undivided Family. The reasoning was that while HUF property was furnished as security, there was no evidence of specific training at the expense of family funds or that the appointment resulted from any outlay or detriment to the family property. Sheel Chandra's prior experience as an Overseer indicated personal fitness. The Court distinguished the reliance on Gokul Chand v. Firm Hukum Chand Nath Mal, explaining that the 'risk of' or 'detriment to' family property in that context referred to expenditure for acquiring qualifications, which was not the case here. The appeal was allowed, setting aside the High Court's judgment.

What were the issues?

1. Whether, on a true construction of the agreement between the Central Bank of India and Sheel Chandra, the salary and other emoluments received by Sheel Chandra as Treasurer are assessable under the head 'salary' or under the head 'Profits and gains of business' (Section 7 vs. Section 10 of the Indian Income-tax Act, 1922). Assessee's contention: The emoluments are salary. Revenue's contention: The emoluments are profits and gains of business. 2. Whether, in the facts and circumstances of the case, Sheel Chandra's emoluments as Treasurer were rightly assessed in the hands of the Hindu undivided family of which he is the Karta. Assessee's contention: The emoluments are individual income, not income of the HUF. Revenue's contention: The emoluments are part of the HUF's income because security was furnished from HUF property and the appointment was not due to personal qualification but lineage and security provision. Reliance was placed on Sivanandan Sharma v. The Punjab National Bank Ltd. and Dharangadhara Chemical Works Ltd. v. State of Saurashtra by the assessee. The revenue relied on Gokul Chand v. Firm Hukum Chand Nath Mal and Commissioner of Income-tax v. Kalu Babu Lal Chand.

Which sections of the Income-tax Act were involved?

Section 7,Section 10,Section 66(1)

AI-generated summary — verify with the full judgment below

-. .: - - l' 3 S.C.R. SUPREME COURT REPORTS 669 M/S. PIYARE LAL ADISHWAR LAL v. THE COMMISSIONER OF INCOME-TAX, DELHI. (S. K. DAS, J. L. KAPUR and M. HIDAYATULLAH, JJ.)

Income Tax-Agreement between Treasurer and Bank--Cons- truction-Treasur~r, whether servant of Bank-Treasurer furnish- ing security of joint family property-Emoluments received by Treasurer, whether income of joint f amily-lndian Income-tax Act, 1922 (1] of 1922) SS. 7 JO. S was the karta of the Hindu undivided family, consisting of himself and his younger brother. Their father was the Treasurer of a Bank till his death in 1950. During his father's lifetime S was employed as an overseer in the Bank on a salary of Rs. 400 a month, and, subsequently, after his father's death · he was appointed Treasurer of the Bank at Delhi and sixteen other branches of the Bank.

As Treasurer he furnished security to the Bank of ceriain properties of the Hindu undivided family.

The agreement dated September 19, 1950, between him and the Bank, showed that he was appointed Treasurer on a monthly salary of Rs. 1,750 and he was also paid certain sums of money for guaranteeing the conduct of the cashiers an

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 7

All 291 judgments and leading authorities on Section 7 →

Recent GST High Court judgments

Search GST case law →