HUF income test for managing agency remuneration: payment for personal services was held to be the coparcener's individual income.

Managing agency remuneration is taxable as Hindu undivided family income only where, in substance, it is a return on family investment or family funds; where it is compensation for services rendered by the individual coparcener, it is his separate income. On the facts, the earlier family connection with the underlying concerns did not make the managing agency a family asset, and the materials showed an independent firm, including a stranger partner, with no adequate nexus between family investment and the appointment as managing agents. The remuneration was therefore assessable as the individual income of B. N. Bhaskar, not as HUF income.

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Issues: Whether the managing agency remuneration received by the assessee was taxable as the income of the Hindu undivided family or as the individual income of B. N. Bhaskar.

Analysis: The governing test is whether the remuneration, in substance, represented a return on the investment of family funds in the business or whether it was compensation for services rendered by the individual coparcener. The existence of an earlier family connection with the underlying concerns did not, by itself, establish that the managing agency firm was a family asset. The materials showed that the firm was independent in character, that one partner was a stranger, that no adequate nexus was proved between family investment in the company and the appointment as managing agents, and that there was no basis to hold that the partners acted as representatives of their respective families.

Conclusion: The remuneration was the individual income of B. N. Bhaskar and not the income of the Hindu undivided family.

Final Conclusion: The reference was answered by treating the managing agency remuneration as assessable in the hands of B. N. Bhaskar individually, with costs awarded against the Revenue.

Ratio Decidendi: Remuneration received by a coparcener or firm is taxable as Hindu undivided family income only when it is, in substance, a return on family investment or family funds; if it is essentially paid for services rendered by the individual, it is his individual income.

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