- (1.) This is an appeal against the judgment and order of the High Court of Punjab made on a reference under S. 66 (1) of the Indian Income-tax Act which was answered in favour of the Commissioner of Income-tax. The appellant is the assessee - a Hindu undivided family - with Sheel Chandra as its Karta and the respondent is the Commissioner of Income-tax.
(2.) The appeal relates to the assessment year 1951-52. The appellant, a Hindu undivided family, consisted of Sheel Chandra and his younger brother. Their father Adishwar Lal. upto his death on 16-4-1950, was the Treasurer of several branches of the Central Bank of India (which in the judgment will be referred to as the Bank). During his father's lifetime Sheel Chandra was employed as an Overseer in the Bank on a salary of Rs. 400 a month. Sheel Chandra was appointed Treasurer of the Bank at Delhi and sixteen other branches of the Bank. As treasurer he furnished security to the Bank of certain properties of the Hindu undivided family, which consisted of title deeds of immovable properties in Chandni Chowk, Delhi and Government of India securities of the value of Rs. 75,000. The Hindu undivided family owns considerable property, its income from house property alone is Rs. 50,000 per annum and it owns stocks, shares and Government securities also of considerable value. As Treasurer, Sheel Chandra received in the year of account from the Bank a sum of Rs. 23,286 and the question for decision is whether this sum is the individual income of Sheel Chandra as salary or it is part of the income of the Hindu undivided family. The Income-tax Authorities held this sum to be the latter and taxed it as such. The Income-tax Appellate Tribunal in upholding this view held that on a proper construction of the written agreement between Sheel Chandra and the Bank, the emoluments received by the Treasurer were profits and gains of business and it further held that as the security furnished by Sheel Chandra came out of the joint family properties, the emoluments could not be said to have been earned without detriment to the family property and therefore were part of the income of the Hindu undivided family. At the instance of the appellant the Tribunal referred under S. 66(1) the following two questions to the High Court:- 1. "Whether in the facts and circumstances of the case and 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 of the said Bank are assessable under the head 'salary' or under the head 'Profits and gains of business'". 2. "Whether in the facts and circumstances of the case, Sheel Chandra's emoluments as Treasurer of the Central Bank of India Ltd., were rightly assessed in the hands of the Hindu undivided family of which he is the Karta". Both questions were answered against the appellant.
(3.) On a consideration of the various clauses of the agreement between Sheel Chandra and the Bank, the High Court held that the relationship between them was not one of master and servant but that of an employer and independent contractor and therefore the emoluments receive by Sheel Chandra as Treasurer were not salary but profits and gains of business. As to the second question the High Court was of the opinion that the emoluments were the income of the Hindu undivided family because Sheel Chandra was not appointed Treasurer on account of any personal qualification but he was appointed because (a) his father was a Treasurer of the Bank before him and (b) he had furnished substantial security which was part of the property of the Hindu undivided family. Against this judgment and order the appellant has come in appeal to this Court.;