GULATI, J. - (1.) THIS is a consolidated reference under section 256(1) of the Income Tax Act, 1961 relating to the assessment years 1958 -59, 1959 -60 and 1960 -61.
(2.) THE assessee is a Hindu undivided family of which Seth Banarasi is the Karta. During the relevant accounting periods, the assessee family derived income from various sources, including an Agriculture Farm, known as Mohan Farm. On this farm sugarcane was grown and the Gur was manufactured from the sugarcane. The assessee claimed exemption from Income Tax in respect of the income arising from the sale of Gur on the ground that is represented agricultural income. This contention has been rejected by the Income Tax Authorities as also by the Income Tax Appellate Tribunal.
(3.) THERE is a company known as M/s. Jaswant Sugar Mills Ltd. at Meerut in January, 1952 the assessee family purchased a large number of share of Jaswant Sugar Mills Ltd. (hereinafter referred to as the Company). The total shareholdings of the assessee family came to be 66.37 percent of the total subscribed capital of the Company. For acquiring these shares the assessee had to take certain loans. On 4th January, 1952 the Board of Directors of the Company appointed Seth Banarsi Das as a Director in a casual vacancy. Later, on 7th February, 1952 by another resolution, the Company appointed Seth Banarsi Das as Chairman of the Board of Directors. There was no stipulation in the resolution with regard to the remuneration to be paid to Seth Banarsi Das. More than 3 1/2 years later on 8th December, 1955 Seth Banarsi Das wrote to the Company demanding remuneration on the ground that he had devoted his whole time to the affairs of the Company, as a result of which the Company had flourished and had earned huge profits. On the some days the Board of Directors of the Company passed a resolution sanctioning as remuneration to Seth Banarsi Das 10 per cent of the net annual profits of the Company, as defined in Section 87(c) of the Indian Companies Act. It appears that the Government of India did not accept remuneration proposed to be given to Seth Banarsi Das and it reduced the remuneration . The Company passed another resolution modifying its earlier resolution and accepting the recommendations made by the Government of India. As a result of this resolution, Seth Banarsi Das received a large sum of money for each of the three assessment years in question as remuneration, besides a sum of Rs. 600/ - on account of the Directors fee. The assessee -family did not include this income in its return on the ground that the remuneration paid to Seth Banarsi Das belonged to him in his individual capacity and did not belong to the family. This claim of the assessee was not accepted by the Income Tax authorities but was accepted finally by the Income Tax Appellate Tribunal. The the Department both being aggrieved, asked for a reference assessee and to the High Court. The Income Tax Appellate Tribunal has accordingly referred the following two questions of law for our opinion : - 1. Whether on the facts and in the circumstances of the case, the income from the sale of Gur manufactured by the assessee out of sugarcane produced at its Mohan Farm was an agricultural incomes and therefore not liable to be charged to Income Tax. 2. Whether on the facts and circumstances of the case the Appellate Tribunal was justifying in directing that the remuneration , Directorss fee or value or perquisites received by Seth Banarsi Das Gupta, Karta of the Hindu undivided family from M/s. Jaswant Sugar Mills. Ltd. be excluded from the assessment of the Hindu undivided family." So far as question No. 1 is concerned, the learned counsel for the parties are agreed that the same is covered by a decision of this Court in I.T.R. No. 11 of 1968, decided on 5th May, 1972 in the name of this very assessee where a similar question relating to the assessment year 1956 -57 was answered against the assessee by holding that the income from sale of Gur did not represent agricultural income. We accordingly answer question No. 1 in the Negative in favour of the Department and against the assessee;;