Commissioner of Income Tax, Madras vs S.A.P. Annamalai, Madras

Veeraswami, J.—This reference relates to the assessment years 1959-60 to 1961-62. The assessment was in the status of Hindu undivided

family which consisted of Annamalai, the Kartha, and his minor son. Annamalai is a Master of Arts and a Law Graduate. He was engaged as an

Editor of a Tamil magazine by name ""Kumudam"". The assessee claimed deduction of a certain sum for each of the year as a deduction in the

computation of the income from the magazine. There is no dispute that for each year the amount claimed was paid to Annamalai as remuneration

for his services as Editor of the magazine. The Revenue disallowed it; but the Tribunal accepted the claim. The question before us is:

Where on the facts and in the circumstances of the case, the remuneration of Rs. 9000. Rs. 6000 and Rs. 9000 paid in each of the years to S. A.

P. Annamalai could be a deduction the computation of the income of Hindu undivided family for the assessment years 1959-60 to 1961-62

respectively?

We are of the view that the claim was rightly disallowed (sic allowed). We are unable to accept the contention for the Revenue that it was the duty

of the Kartha under the Hindu Law to carry on the business of the family and do his utmost for furthering the same and, therefore, the remuneration

claimed by Annamalai and paid by the Hindu undivided family should be disallowed as a deduction. It seems to us that the point is really covered

by Jugal Kishore Baldeo Sahai Vs. Commissioner of Income Tax, U.P., Lucknow, . Following an earlier decision in Jitmal Bhuramal Vs.

Commissioner of Income Tax, Bihar and Orissa, the Supreme, Court held that the remuneration paid by the Hindu undivided family to the Kartha

who managed the family business should be deducted as expenditure u/s 10(2)(xv), Observed the Supreme Court:--

This Court in Jitmal Bhuramal Vs. Commissioner of Income Tax, Bihar and Orissa, has already held that a Hindu undivided family can be allowed

to deduct salary paid to a member of the family, if the payment is made as a matter of commercial or business expediency.

Jugal Kishore Baldeo Sahai Vs. Commissioner of Income Tax, U.P., Lucknow, was a case of a Kartha, though the earlier case related to a junior

member of the family. For the Revenue it is said that Jugal Kishore Baldeo Sahai Vs. Commissioner of Income Tax, U.P., Lucknow, is

distinguishable because the payment of remuneration was on the basis of an agreement which is lacking in this case. But we fail to see what

difference does it make so long as a matter of fact salary has been paid to the Kartha of the family for managing or carrying on its business. In this

case the other member of the family being a minor, one cannot visualise an agreement. But that does not mean that the Kartha who was carrying on

the joint family business and particularly the magazine had no power acting for the joint family, to allow salary for his services from the funds of the

joint family business. The essence of the matter is the service rendered by the kartha of the family in consideration of the remuneration him, whether

it be founded on an agreement or not. No question has been raised at any stage below that the expenditure was not a commercial or business

expediency.

We answer the question against the Revenue with costs; counsel''s fee Rs. 250.

Reference answered accordingly.