HUF income treatment of partnership allowance depends on whether payment reflects personal services or family-linked commercial consideration.

A payment received by a coparcener under a partnership deed is ordinarily treated as the individual income of the partner, but the character of the receipt depends on the contractual basis of the payment. Where the deed shows that the monthly allowance is not confined to personal services and is also linked to goodwill, business location, or other family-related commercial considerations, the receipt may be assessable as HUF income. On the facts noted, the allowance was treated as income of the Hindu undivided family rather than the recipient's personal income, and the assessee's challenge failed.

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Issues: Whether the monthly allowance received by a member of a Hindu undivided family from a partnership firm, under the terms of the partnership deed, constituted the income of the Hindu undivided family or the individual income of the recipient.

Analysis: The general rule is that remuneration received by a member of an HUF as partner of a firm in which the HUF is a partner is taxable as the member's individual income. On the facts here, however, the partnership deed showed that the monthly payment was not confined to personal services alone; it was also stipulated as consideration for goodwill and the business location, and the payment was to continue even after retirement. The contractual setting indicated that the receipt arose in the representative capacity of the karta of the smaller HUF rather than in a purely personal capacity.

Conclusion: The allowance was held to be income of the HUF and not the individual income of Motilal.

Final Conclusion: The additions made by the Income Tax Officer were restored and the assessee's challenge failed.

Ratio Decidendi: Where a payment under a partnership deed is referable not merely to personal services but also to the business goodwill or other family-related commercial consideration, the receipt may be assessable as HUF income notwithstanding the general rule applicable to remuneration earned by a coparcener as partner.

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