Family-fund nexus in partnership remuneration makes a karta's receipt taxable as Hindu undivided family income.

Remuneration received by a karta from a partnership firm was held includible in the Hindu undivided family's income where the family funds supplied the capital for the partnership interest. The decisive factor was the direct nexus between the joint family funds and the right to receive the remuneration: the karta did not act in any separate individual capacity, and the receipt arose from his position as partner acquired through family assets. Authorities treating similar receipts as personal income were distinguished because they lacked that family-fund connection. The amount was therefore attributable to the family and assessable in its hands.

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Issues: Whether remuneration received by the karta of a Hindu undivided family from a partnership firm, where the family funds furnished the partner's capital contribution, was includible in the total income of the family.

Analysis: The remuneration was paid under the partnership deed to a partner for services rendered in the conduct of the firm's business. The karta entered the partnership with capital supplied from the joint family till, and the right to receive the remuneration arose directly from his position as partner obtained through the family funds. On the facts found, there was no independent personal employment or separate individual capacity in which the karta rendered services so as to sever the receipt from the family's interest. The authorities and the Tribunal therefore treated the amount as part of the profits earned through the partnership connection and attributable to the Hindu undivided family. The contrary authorities relied on were distinguished because they turned on absence of nexus between family funds and the earning of the income.

Conclusion: The remuneration was includible in the total income of the Hindu undivided family. The answer to the referred question was in the affirmative, in favour of the Revenue.

Final Conclusion: Income earned by a karta through a partnership entered into with the aid of joint family funds is taxable in the hands of the Hindu undivided family when the receipt is directly linked to that partnership capacity.

Ratio Decidendi: Where a karta becomes a partner with capital supplied by the joint family, remuneration received by him for services as partner is assessable as family income if the earning of that remuneration is directly attributable to the use of joint family funds.

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