Karta remuneration as business expenditure is deductible when paid for actual services and commercial expediency exists.

A Hindu undivided family's remuneration to its karta was held deductible as business expenditure where it was paid for services actually rendered in the family business. The Madras HC applied the commercial expediency test under the Income-tax Act, 1922, and treated the payment as real expenditure incurred for the business. The absence of a formal agreement did not defeat the deduction because the karta had in fact performed services as editor of the magazine. The remuneration was therefore allowable, and the issue was answered in favour of the assessee and against the Revenue.

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Issues: Whether remuneration paid by a Hindu undivided family to its karta for managing the family business was deductible as a business expenditure in computing the family's income.

Analysis: The assessment years were governed by the Income-tax Act, 1922. The remuneration was in fact paid to the karta for services rendered as editor of the magazine. The Court followed the principle that salary paid to a member of a Hindu undivided family is deductible when the payment is made as a matter of commercial or business expediency. It held that the absence of a formal agreement did not matter where the karta had rendered services for the family business and the payment represented real expenditure incurred for the business.

Conclusion: The remuneration was allowable as a deduction and the question was answered against the Revenue.

Ratio Decidendi: Salary or remuneration paid by a Hindu undivided family to its karta for services actually rendered in the course of the family business is deductible as business expenditure if the payment is commercially expedient.

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