Karta's salary as separate income: personal-service remuneration was not taxable as the Hindu undivided family's share income.

Salary paid to a karta of a Hindu undivided family for personal services rendered to a firm was treated as the karta's separate income when it was not referable to any detriment to family assets or to the family's partnership interest. The High Court therefore held that such salary could not be included in the HUF's share income and was not assessable in the hands of the family. Once that conclusion was reached, the question whether the salary could be allowed as a deduction in the HUF assessment did not survive for decision.

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Issues: (i) Whether salary paid by a firm to a karta of a Hindu undivided family for personal services rendered by him formed part of the family's share income and was assessable in the hands of the Hindu undivided family. (ii) Whether the salary so paid could be allowed as a deduction in the assessment of the Hindu undivided family.

Issue (i): Whether salary paid by a firm to a karta of a Hindu undivided family for personal services rendered by him formed part of the family's share income and was assessable in the hands of the Hindu undivided family.

Analysis: The Court followed the binding Division Bench decision holding that where salary is paid to the karta in consideration of his personal services and not because of any detriment to the family assets, the receipt is the karta's separate income. The later Supreme Court decision on partnership remuneration did not displace the earlier line of authority on the facts found in these references.

Conclusion: The salary could not be included in the share income of the Hindu undivided family; the answer to the first question was in the negative, in favour of the assessee and against the Revenue.

Issue (ii): Whether the salary so paid could be allowed as a deduction in the assessment of the Hindu undivided family.

Analysis: Once the first question was answered against inclusion of the salary in the family's share income, the second question did not survive for adjudication.

Conclusion: No answer was called for on the second question.

Final Conclusion: The references were answered in favour of the assessees and the writ petitions were allowed.

Ratio Decidendi: Salary paid to a karta of a Hindu undivided family for personal services, and not by reason of the family's partnership interest, is assessable as the karta's separate income and not as the family's share income.

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