Family funds creating the source of a karta's office income can make remuneration taxable as Hindu undivided family income.

Income earned by a karta from an office or appointment is taxable as Hindu undivided family income where family funds, directly or indirectly, enabled acquisition of that source of income. The court treated the managing directorship obtained through a family-linked partnership as sufficiently connected to the family's resources, so the remuneration was assessable in the hands of the family rather than as the karta's personal income. The interposition of a partnership did not break the nexus, because indirect use of family funds was legally material. The question was answered against the assessee.

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Issues: Whether the managing director's remuneration received by a karta was assessable as the income of the Hindu undivided family where the opportunity to obtain the office arose from family funds used directly or indirectly through a partnership.

Analysis: The governing principle applied was that where family funds are used, directly or indirectly, to acquire the source of income or to enable the karta to obtain the gain, the resulting receipt is taxable in the hands of the family and not as the karta's personal income. The court treated the controlling interest acquired through the family-linked partnership as sufficient nexus between the family funds and the managing directorship. The distinction sought on the basis of interposition of a partnership was rejected because indirect use of family funds was held to be legally material.

Conclusion: The remuneration was rightly included in the assessment of the Hindu undivided family and the question was answered against the assessee.

Ratio Decidendi: Income earned by a karta from an office or appointment is assessable as family income where family funds, directly or indirectly, enabled him to acquire that source of income.

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