Satish Chandra, J. - (1.) THE assessee is a Hindu undivided family of which Hari Krishna is the karta. For the assessment year 1964-65, Had Krishna received Rs. 6,000 as managing director's remuneration from M/s. Beharilal Mannilal Investors and Financiers Private Ltd. THE claim of Hari Krishna that this was his individual income was rejected by the Income-tax Officer on the ground that the family funds were Invested in the purchase of the shares of the company of which the assessee became the director.
(2.) ON appeal the finding was affirmed and it was held that the managing director's remuneration was the income of the Hindu undivided family. The assessee carried the dispute to the Tribunal but failed. At the instance of the assessee the Tribunal has referred the following question of law for the opinion of this court : "Whether, upon the facts and circumstances of the case, the amount of Rs. 6,000 received by Sri Hari Krishna as salary in the capacity of a managing director of M/s. Beharilal Mannilal Investors and Financiers Pvt. Ltd. constitutes his individual income or is liable to tax in the hands of the assesste Hindu undivided family ?" A partnership, M/S. Beharilal Mannilal, carried on money-lending and kirana business. It consisted of two partners, namely, Mannilal and Sarju Prasad, who were brothers, and were partners on behalf of their respective Hindu undivided families. In 1950, the business of this firm was taken over by a company styled as M/s. Beharilal Mannilal Investors and Financiers Private Ltd. It had 3!5 shares in which Hari Krishna acquired 200 shares. The consideration for buying these shares was paid out of his undivided family funds, Hari Krishna was appointed a life-director of the company on the condition that he continued to hold shares of the minimum value of Rs. 800 (sic) in his name. He was to be the first managing director of the company subject to the terms of an agreement between him and the company. On 24th January, 1950, an agreement was entered into under which Hari Krishna was appointed as a managing director for a period of ten years, The managing director's remuneration was fixed at Rs. 500 per month. On the expiry of this agreement, another agreement was entered into on 25th January, 1960, under which Hari Krishna was appointed as a managing director for ten years on the same terms, namely, salary of Rs. 500 per month plus conveyance and travelling expenses incurred by him for the business of the company. Hari Krishna was in addition to be provided with free residential house. The managing director was entitled to the management of the whole affairs of the company. He was to conduct the business of the company. He was given powers to borrow, to lend and invest money and to acquire and dispose of property and to do all other acts and things necessary to act as managing director.
(3.) HARI Krishna's Hindu undivided family consisted of himself, his wife and four sons. In 1953, there was a partial partition under which out of 200 shares held by this Hindu undivided family in the company, 50 were allotted to HARI Krishna and the remaining were given to the sons. The sons separated from the family. Thereafter, the family consisted of HARI Krishna and his wife only. Since the partition and till the assessment year 1963-64, the managing director's remuneration received by HARI Krishna was assessed in the status of an individual. On 3rd August, 1959, a son was born to Hari Krishna. Accordingly, Hari Krishna filed a return of certain incomes in the status of a Hindu undivided family, but he claimed that the managing director's remuneration was his individual income and could not be assessed as the income of the Hindu undivided family.;