SUNDERLAL NANALAL HUF Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF GUJARAT
SUNDERLAL NANALAL (HUF)
COMMISSIONER OF INCOME TAX
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MEHTA, J. -
(1.) AT the instance of the assessee, the Tribunal, Ahmedabad, has referred to us the following question
for our opinion:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee family was not entitled to deduction of the remuneration paid to Mahendra Sunderlal ?"
(2.) A few relevant facts need be stated in order to appreciate the question which has been referred to us.
The assessment year under reference is 1970 71, the previous year being S.Y. 2025, which ended on November 9, 1969. The assessee is an HUF and its Karta is one Sunderlal Nanalal, who
was a partner in the firms of M/s Nanalal Mansukhram and M/s Mansukhram Bhagwandas. It
appears that on account of old age and indifferent health of the said Sunderlal, he was not in a
position to attend and devote full time to the business of the said firms. The Karta, Sunderlal
Nanalal, therefore, engaged Mahendra Sunderlal, one of the coparceners of the assessee family, to
help him in the management of the business of the said firms. Mahendra Sunderlal had to act as
representative of the Karta and it was agreed between said Sunderlal Nanalal and Mahendra
Sunderlal that the latter was to be paid a monthly remuneration of Rs. 250 for the said services.
The terms of the agreement were reduced to writing on November 16, 1968. In the course of the
assessment proceedings, for the assessment year under reference, the assessee family claimed
deduction of the remuneration of Rs. 3,000 paid to Mahendra Sunderlal in the year of account
relevant to the assessment year in question. The claim did not find favour with the ITO who
rejected it on the ground that no such claim was made in the past and that the payment of the
salary was not expenditure (incurred) for earning income from the aforesaid firms.
(3.) THE assessee family, therefore, carried the matter in appeal before the AAC, Ahmedabad, who by his order of November 26, 1973, held that the claim made by the assessee was admissible in
the light of the two decisions of the Supreme Court in Jugal Kishore Baldeo Sahai vs. CIT (1967) 63
ITR 238 (SC) and Jitmal Bhuramal vs. CIT (1962) 44 ITR 887 (SC). He, therefore, reduced the
income of the family by Rs. 3,000.;
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