Deductibility of family remuneration depends on bona fide services, reasonableness, and absence of profit diversion.

Remuneration paid to members of a Hindu undivided family for services actually rendered in the family business is deductible where the payment is bona fide, reasonable, and not a device to divert profits or evade tax. If the amount is excessive, disproportionate, or not genuinely linked to services, it may be treated as a distribution of profits instead of an allowable business expense. The disallowance rule applicable to payments by a firm to its partners does not apply in the same way to Hindu undivided family trading concerns. On the facts considered, the payment was allowed as a deduction.

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Issues: Whether remuneration paid to members of a Hindu undivided family for services actually rendered in the family business is deductible in computing business profits.

Analysis: The remuneration paid to family members is allowable if it is a bona fide payment for actual services rendered, is not excessive or unreasonable, and is not a device to escape income-tax. If the amount is disproportionately high or not genuinely referable to services, it may be treated as a distribution of profits. The applicability of the deduction depends largely on the facts of each case. The statutory disallowance of payments by a firm to its partners was held not to govern Hindu undivided family trading concerns in the same way.

Conclusion: The amount paid could be legitimately deducted on the facts found, and the answer to the reference was in the affirmative in favour of the assessee.

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