1984 (11) TMI 40

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....was the income of the Hindu undivided families of which they were the kartas and confirming the assessments of the said income in the hands of the respective Hindu undivided families ?" The assessees are three divided brothers. They became partners of two firms representing their respective joint families. The firms were constituted as far back in 1962. Up to 1974, the partners were not drawing any remuneration for the services rendered by them in the firms. But, on March 31, 1974, the partners passed a resolution in the respective firms for payment of salary to each one of them with effect from April 1, 1974. They were accordingly paid remuneration more or less equal to the profit-sharing ratio to which they are entitled under the deed ....

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....d experience of the partners which would justify the payment all of a sudden for their individual services under the resolution passed by the two firms. The salaries paid are also more or less in their profit-sharing ratio except with a minor difference, since Shri P. N. Bhandarkar was paid a total sum of Rs. 1,000 p.m. and the other two partners have been paid Rs. 800 p.m. each. The narration in the resolutions that the salaries were paid for putting in extra efforts and exertion is really a self-serving statement because it cannot be said that till they were paid these salaries they were not putting in full effort and exertion in the conduct of the business. On the facts, I agree with the learned Appellate Assistant Commissioner that the ....

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.... ITR 33, reviewed all the decisions including the principles enunciated in Krishna Iyer's case [1969] 73 ITR 539. The learned judge summarised the principles as follows (p. 43 of 78 ITR): " (1) whether the income received by a coparcener of a Hindu undivided family as remuneration had any real connection with the investment of the joint family funds; (2) whether the income received was directly related to any utilization of family assets; (3) whether the family had suffered any detriment in the process of realization of the income; and (4) whether the income was received with the aid and assistance of the family funds. In our opinion, from these subsidiary principles, the broader Principle that emerges is whether the remunera....

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.... do not possess any special qualification in the business, warranting the special remuneration paid to them. The remuneration was not paid either for their special knowledge, or for their special position in the firms like managing partner or a managing director in the company. All the three persons became partners by the investment of the family funds and continued as partners and partners only. They continued to discharge the same old duties with the same old responsibilities. The Tribunal has found, as a matter of fact, that the increase in the business turnover cannot be attributed to any extra service rendered by the partners.. The Tribunal has also found that the remuneration to the partners was more or less in the profit-sharing r....