SUNDERLAL NANALAL (HUF) Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF GUJARAT
SUNDERLAL NANALAL (HUF)
COMMISSIONER OF INCOME TAX
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(1.) At the instance of the assessee, the Income-tax 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?
A few relevant facts need be stated in order to appreciate the question which has been referred to us.
(2.) The assessment year under reference is 1970-71, the previous year being S.Y. 2025, which ended on November 9, 1969. The assessee is a 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 V/s. CIT, 1967 63 ITR 238 and Jitmal Bhuramal v. CIT, 1962 44 ITR 887. He, therefore, reduced the income of the family by Rs. 3,000.;
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