Judgement

RAMASWAMI, J. :- This appeal is brought by certificate on behalf of the assessee from judgment of the Bombay High Court dated July 23, 1963, in Income Tax Reference No. 5 of 1962.

2. The appellant (hereinafter called the assessee) is a Hindu undivided family of which Shri M. D. Dhanwatey is the Karta. The assessment year involved in this appeal is 1954-55, the corresponding accounting year being the year ended September 30, 1953. Shri M. D. Dhanwatey was a partner in the partnership firm carrying on business under the name and style of M/s. Shivraj Fine Art Litho Works. The share capital of Shri M. D. Dhanwatey was entirely contributed by the assessee Hindu undivided family. The rights of the partners were governed at the relevant time by a partnership agreement dated April l, 1951. According to the agreement, the partnership was of lithography and art printing and was carried on by means of a press under the name and style of Shivraj Fine Art Litho Works . Clause (4) of the partnership deed enumerated various capital contributions of the partners. The share contribution of Shri M. D. Dhanwatey was shown as Rupees 1,96, 875. It is admitted that this amount belonged to the Hindu undivided family. Clause (5) provided for payment of interest at a certain rate to the partners on the share contribution. Clause (7) provided that general management and supervision of the partnership business shall be in the hands of Shri V. D. Dhanwatey. Clause (8) stated that Shri M. D. Dhanwatey shall be the manager in charge of the works and both he and Shri. V. D. Dhanwatey shall have power to make contracts, and arrange terms with constituents or customers. Clause (10) empowered three partners, viz., V. D. Dhanwatey, M. D. Dhanwatey and Shamrao Dhanwatey to appoint such person or persons on such salary as they deem fit for carrying on the work of the partnership and delegate to them such powers as they think proper. Clause (15) provided that the various adult members of the partnership shall devote their whole time and attention to the partnership in the sphere of their respective duties. Clause (16) is the material clause and it provides for various amounts to be paid by way of remuneration to the partners. The remuneration provided to be paid to Shri M. D. Dhanwatey under Cl. (16) is Rs. 1,250 per month. For the relevant accounting year Shri M. D. Dhanwatey was paid Rs. 7,500 as remuneration. For the assessment year 1954-55 the assessee showed the said amount in Section D of the return: It was contended that the salary received by Shri M. D. Dhanwatey, the karta of the assessee family was received by him in his individual capacity and that it was not taxable in the hands of the assessee. The Income-tax Officer, Special Investigation Circle B , Nagpur, by his assessment order dated May 28, 1955 negatived the contention of the assessee. The assessee took the matter to the Appellate Assistant Commissioner but the appeal was dismissed. The assessee preferred a further appeal to the Appellate Tribunal which rejected the contention of the assessee that the amount of Rs. 7,500 was earned by Shri M. D. Dhanwatey in his individual capacity and that it could not have been included in the taxable income of the assessee. As directed by the High Court, the Appellate Tribunal stated a case on the following question of law under Section 66 (2) of the Indian Income-tax Act, 1922 :

"Whether on the facts and circumstances of the case, the payment of Rs. 7,500 (Rupees seven thousand five hundred) paid to Shri M. D. Dhanwatey for rendering services to the firm, could be included in the total income of the assessee family ?"

The High Court answered the reference in favour of the Income-tax Department and against the assessee. The High Court observed that Shri M. D. Dhanwatey was one of the partners in the partnership as representing the Hindu undivided family consisting of himself and his two minor sons There was no evidence whatever to show that Shri M. D