Partner remuneration to HUF not salary income; treated as share of profits, so standard deduction was denied.

Remuneration paid to a partner representing a Hindu undivided family could not be taxed as salary because no employer-employee relationship existed between the firm and the family. Applying the earlier principle that a Hindu undivided family is not a legal entity capable of contracting as an employee, the payment was treated as the partner's share of profits rather than salary income. As a result, standard deduction under section 16(i) of the Income-tax Act, 1961 was unavailable, and the issue was answered against the assessee and in favour of the Revenue.

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Issues: Whether remuneration received by a partner representing a Hindu undivided family from a partnership firm was assessable as salary income with standard deduction under section 16(i) of the Income-tax Act, 1961, or as share of profits under the head other sources.

Analysis: The assessment year was 1982-83. The decisive question was whether an employer-employee relationship existed between the assessee and the firm. Following the earlier ruling that a Hindu undivided family is not a legal entity capable of contracting as an employee of the firm, the amount paid to the partner representing the family could not be treated as salary. It was instead liable to be regarded as the partner's share of profits, on which standard deduction was not available.

Conclusion: The remuneration could not be assessed as salary and the claim to standard deduction under section 16(i) failed; the question was answered against the assessee and in favour of the Revenue.

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