A Hindu undivided family can be allowed to deduct salary paid to a member of the family, if the payment is made as a matter of commercial or business expediency.

Judgment

BHARGAVA, J. : These appeals by special leave are directed against the judgment of the Allahabad High Court returning an answer to the following question referred to it by the Income-tax Appellate Tribunal:

"Whether on the facts and circumstances of the case the salary paid or credited to a Karta of the family for looking after the family s business was a permissible deduction under S. 10 (2) (xv) in computing the income of the family business.

2. The assessee was a Hindu undivided family carrying on a joint family business of commission agency in cloth under the name of Jugal Kishore Baldeo Sahai and was, in addition, deriving income from some property and from some partnership business in which the karta Babu Ram was a partner representing the interest of the Hindu undivided family. The family consisted of Babu Ram, his brother Gobardhandas and their sons. In June, 1946, the karta Babu Ram wrote a letter to his brother Gobardhandas, who was the only other adult member of the family, stating that, since he was managing all the business, he ought to get a salary of Rs. 1,000/- per month. Gobardhandas promptly agreed to this proposal and consequently in the account books of the family for the year in question a sum of Rs. 12,000/-was debited in the expense account of the Hindu undivided family business, viz., of Jugal Kishore Baldeo Sahai and the same amount was credited in the name of Babu Ram as an individual. The first such credit was made in the account year relevant to the assessment year 1946-47 and similar credits continued to be made in subsequent accounting years upto the year relevant to the assessment year 1952-53. Thus, the debit against the Hindu family business at the rate of Rs. 12,000/- per year and similar credit in the name of Babu Ram was made in the accounts for seven years. In each of these seven years the Hindu undivided family as the assessee claimed that this sum of Rs. 12000/- every year should be deducted as an expenditure under S. 10 (2) (xv) of the Income-tax Act. The Income-tax Officer rejected the Claim and that order was upheld by the Appellate Assistant Commissioner as well as by the Tribunal. Thereupon, at the request of the assessee appellant, the question reproduced by us was referred by the Tribunal for the opinion of the High Court. The High Court answered the question against the appellant and upheld the view of the Tribunal. Consequently, these appeals have been brought up before us.

3. The High Court has taken the view that under the Hindu Law, a karta is bound by reason of his being the karta to manage all the business of the family without being entitled to any remuneration for the service of management. It went on to comment that indeed, when under the law a karta represents the family, it would be anomalous to think of a karta as being an employee of himself or being entitled to remuneration for acting as such and receiving payment from his own-self. This view was expressed by the High Court on the basis of its opinion about the rights and duties of a karta of a Hindu undivided family under the Hindu Law and to arrive at this view, the court relied on a comment in Gopalchandra Sarkar Sastri s Hindu Law, 1940 Edn., N. E. Raghavachariar s Hindu Law 4th Edn., and Mayne s Hindu Law, 11th Edn., and in addition, on a decision of the Madras High Court in Krishnasami Ayyangar v. Rajagopala Ayyangar, ((1895) ILR 18Mad73). It was on the basis of these comments in the books of Hindu Law that the Allahabad High Court held the view that Babu Ram, being the karta of the family, was not entitled to draw any remuneration for carrying on the business of the Hindu undivided family.

4. The decision of the Madras High Court and the views expressed by these commentators do not show that a Karta of a Hindu undivided family is not entitled to charge for services rendered to the family business under any circumstances at all. The right to receive remuneration is negatived with some qualifications. Eith