TaxTMI 
TaxTMI 
1959 (5) TMI 8
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....r the purpose of acquiring and taking over the said India Electric Works as a going concern. The said B. K. Rohatgi was one of the Promoters of that company. Pursuant to an agreement with the vendors of the business of India Electric Works the said B. K. Rohatgi, as such promoter as aforesaid and on behalf of the said company then to be formed, took over the said business as a going concern on and from March 1, 1930, and carried on the same since then until December 19, 1930, when the contemplated company was eventually incorporated under the Indian Companies Act as a private company with limited liability under the name of India Electric Works Ltd. (hereinafter called "the said company"). Article 132 of the articles of association of the said company provided that the first managing director would be the said B. K. Rohatgi or "his assigns or successors in business whether under his name or any other style or firm" and that the said B. K. Rohatgi would continue to be the managing director until he would resign or be found guilty of any act of fraud or dishonesty or be removed in the manner thereinafter provided. Article 133 laid down the circumstances in which and the conditions ....
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....ion received by B. K. Rohatgi amounted to Rs. 61,282 and during the 1943-44 assessment proceedings it was claimed that the whole of it was the personal earnings of the said B. K. Rohatgi and should not be added to the income of the Hindu undivided family which is the respondent before us. The Income-tax Officer rejected this claim. On appeal to the Appellate Assistant Commissioner, the latter concurred with the view of the Income-tax Officer. The assessee went up on further appeal to the Income-tax Appellate Tribunal. The Tribunal struck a middle course. It held that Rs. 61,282 was made up of two kinds of remuneration, namely, (1) remuneration for services rendered by the assessee family in the floatation and financing of the said company and (2) remuneration for the personal services of the said B. K. Rohatgi. The Tribunal, therefore, apportioned the amount received between the two categories of remuneration and allocated Rs. 30,000 computed at the rate of Rs. 2,500 per month to the personal services of the said B. K. Rohatgi and the rest to the remuneration due to the services of the assessee family. On the application of the respondent-assessee the Tribunal made a reference ....
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....(c).---The answer is a matter of inference from the facts above stated. The Tribunal's conclusion was that Mr. B. K. Rohatgi was originally appointed to and was at the relevant time holding the office of the managing director of the India Electric Works Limited in his capacity as a member and karta of the assessee family." Learned counsel appearing before the High Court did not make any attempt to support the Tribunal in its choice of the middle path but conceded that the income was either the income of the family or the personal income of the said B. K. Rohatgi and that there could be no justification for ascribing a portion of it to the remuneration of the said B. K. Rohatgi as an officer of the company and ascribing the other portion to a return made by the company to the family for benefits received. The High Court accordingly answered the first question in the negative. As regards the second question, the High Court thought that the case was covered by the decision in the case of Commissioner of Income-tax v. S. N. N. Sankaralinga Iyer and expressed the opinion that the assessment of the said sum of Rs. 61,282 should be on Mr. Rohatgi personally. Feeling aggrieved by the a....
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....ompany with limited liability (See Haridas Purushottam, In re ). Stone, C.J., with whom Chagla, J., agreed, held that as the managing agency was derived from or acquired with the assistance of the joint family property, that is, the mills in which the assessee as karta was beneficially interested, the income from the managing agency received by the assessee must be treated as the income of the family of which he was the karta. Reference is, however, made to certain decisions in support of the contrary view ; but those decisions appear to turn on the facts found to be established in those particular cases. Thus, in Murugappa Chetty v. Commissioner of Income-tax it had not been established either that the managing agency agreement had, in fact, been obtained by the karta for and on behalf of the Hindu undivided family or that the income was earned by utilising the joint family property or utilising it to its detriment. The case of Hanumanthappa v. Commissioner of Income-tax simply follows Murugappa Chetty's case and does not carry the matter any further. As will be seen hereafter, to the facts established in the case now before us these two decisions can have no application. It is ....
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....ration which was, therefore, held to be the personal earnings of the karta who had been appointed as the managing director. The case of Commissioner of Income-tax v. S. N. N. Sankaralinga Iyer, does not help the respondent because of the facts found in that case. In that case it was found that the remuneration of the managing director was earned by him in consideration of the services which he rendered to the bank and no part of the family funds had been spent or utilised for acquiring that remuneration except that the necessary shares to acquire the qualification of a managing director were purchased out of the joint family funds. It was said that there was no detriment to the family property in any manner or to any extent, as admittedly the shares earned dividends which were included in the income of the family. Satyanarayana Rao, J., took the view that on the facts of that case it was impossible to infer that the appointment itself was on behalf and for the benefit of the family ; or, in other words, that he became the managing director as representing the undivided family. Viswanatha Sastri, J., in a separate but concurring judgment expressed the view that the mere fact that th....