JAGDISH SAHAI J. - (1.) AT the instance of the assessee, Sri Nagar Das (hereinafter referred to as the assessee), the Income-tax Appellate Tribunal, Bombay Bench (hereinafter referred to as the Tribunal), has submitted statement of the case and refereed the following question of law for the opinion of this court under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) : Whether, on the facts and in the circumstances of the case, the sum of Rs. 6,000 forming part of the sum of Rs. 9,334 being Nagar Dass share of profits in the firm of Hari Prasad Ram Kishan is liable to be taxed in the hands of his Hindu undivided family ?
(2.) THE reference arises out of the assessment made upon the Hindu undivided family of Nagar Das for the assessment year 1959-60, the accounting year being the year ending Kuar Sudi 9, Samvat 2015. Originally the assessees family had also some other branches joint with it. A partial partition took place in that family some time in the year 1951. Originally the Hindu undivided family was carrying on business in cloth. After the partial partition, it was carried on by a partnership firm constituted of the separated coparceners. THE partners in this firm are Ram Kishan, Nagar Das and Gopal Kishan. The statement of the case in clear that Nagar Das represented his Hindu undivided family which provided funds on behalf of Nagar Das for investment in the partnership business. Gopal Kishan is practicing medicine in Calcutta and was not available to work in the partnership business. In the partnership deed dated October 18, 1951, it was provided that Ram Kishan and Nagar Das, who were looking after the partnership business, would be paid a remuneration of Rs. 500 per month subject to that sum being modified at any time in future. Ram Kishan died on August 6, 1957. The firm was reconstituted and a partnership deed was executed in respect of it on 26th September, 1957. In the new partnership Shyam Sunder, a son of Ram Kishan, deceased was the partnership taken in as a third partner in place of Ram Kishan. Under clause 10 of the partnership deed dated 26th September, 1957, it was provided that Nagar Das and Shyam Sunder would each receive a remuneration of Rs. 500 per month for looking after the affairs of the business but this amount could be varied in future.
(3.) FOR the assessment year 1959-60, the new firm of Hari Prasad Ram Kishan claimed registration under section 26A of the Act. This was allowed. The Hindu undivided family of Nagar Das was paid Rs. 9,334 in accordance with the provisions of section 16(1) (b) of the Act in respect of the income of the firm. The sum of Rs. 9,334 was made up of two items : Rs. 6,000 paid by way of remuneration to Nagar Das and Rs. 3,334, the share of Nagar Das in the profits of the firm. Nagar Disclaimed this amount as his personal income and objected to that sum being included in computing the assessable income of the Hindu undivided family. The Income-tax Officer rejected the contention and included that sum in the income of the Hindu individual family. The assessee appealed to the Appellate Assistant Commissioner. The liability of the inclusion of the sum of Rs. 3,334 in the assessable income of the assessee does not seem to have been challenged before him and the appeal was confined to the sum of Rs. 6,000, i.e., to the amount received by Nagar Das as remuneration. The Appellate Assistant Commissioner dismissed the appeal and upheld the inclusion of Rs. 6,000 in the computation of the assessee familys total income. The assessee appealed to the Tribunal affirmed the findings of the Income-tax Officer and the Appellate Assistant Commissioner and dismissed the appeal. But, at the instance of the assessee, it made the instant reference.;