Karta remuneration from partnership income: taxable in Hindu undivided family hands when linked to family capital investment.

Remuneration received by a karta from a partnership was examined on the basis of whether it arose from the use of Hindu undivided family assets or from the karta's personal services. Where the family supplied the entire capital and the karta joined the firm in that character, the payment was treated as connected with the family's investment and therefore assessable as the family's income, not the karta's individual income. The legal test focused on whether the acquisition was impressed with joint family character because it was made with aid of family assets and without detriment to the estate. A dissent viewed the remuneration as payment for special services and as individual income, lacking a real nexus with family funds.

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Issues: Whether remuneration received by the karta of a Hindu undivided family from a partnership in which the family capital was invested was assessable as the income of the Hindu undivided family or as the karta's individual income.

Analysis: The family had supplied the entire capital for the partnership, and the karta became a partner in that character. The remuneration was payable under the deed of partnership and was treated as arising from the very arrangement by which the family funds were employed in the business. The governing principle applied was that an acquisition by a coparcener is impressed with the character of joint family property when it is made with the aid of joint family assets and not without detriment to the family estate. On the facts found, the payment was not an independent personal earning divorced from the family investment, but was directly connected with the use of joint family funds in the partnership venture. The Tribunal's conclusion was treated as involving application of the legal test to primary facts, so the High Court could examine whether the correct legal principle had been applied.

Conclusion: The remuneration was rightly included in the total income of the Hindu undivided family and was not assessable as the karta's individual income.

Final Conclusion: The appeals failed because the remuneration was held to be attributable to the family's investment in the partnership and therefore taxable in the hands of the assessee family.

Dissenting Opinion: Hegde J. held that the remuneration was paid for special services rendered by the karta, that there was no real and substantial nexus between the family funds and the earnings, and that the income was the karta's individual income because it was received without detriment to the family estate. He would have allowed the appeals.

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