Judgement

RAMASWAMI, J. :-These appeals are brought, by certificate, on behalf of the assessee from the judgment of the Bombay High Court dated July 23, 1964 in Income Tax Reference No 85 of 1963.

2. The appellant (hereinafter called the assessee ) is a Hindu Undivided Family represented by its Karta, Shri V. D. Dhanwatey. The assessment years involved in these appeals are 1954-55 and 1955-56. For the year 1954-55 there was a deed of partnership dated April 1,1951 governing the relationship of the partners. For the year 1955-56 there was another partnership deed dated October 1, 1953. There was, however, no material change in the terms of the two deeds of partnership. The business carried on by the partnership was of lithography and art printing and was carried on through a Press under the name and style of Shivraj Fine Art Litho Works. The capital of the partnership under the partnership deed was Rs. 10,50,000. Clause (4) of the partnership deed enumerated the share capital contributed by the partners as follows:

"1. Baburao alias Vasantrao Dattaji Dhanwatey Two annas

2. Marotirao Dattaji Dhanwatey Three annas

3. Shamrao Dattaji Dhanwatey Two annas

4. Shankarrao Dattaji Dhanwatey Two annas, three pies

5.Krishnarao Dattaji Dhanwatey Two annas, three pies

6. Balu alias Yeshwantrao Dattaji Dhanwatey Two annas, three pies

7. Shivaji Vasantrao Dhanwatey Two annas."

Clause (5) states that interest at the rate of 5 per cent per annum shall payable to each partner on the amount of the capital. Clause (7) provides that general management and supervision of the partnership business shall be in the hands of Shri V. D. Dhanwatey. Clause (8) states that Marotirao Dhanwatey shall be the manager incharge of the works and both he and Vasantrao 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 cubes. Clause (l6) is to the following effect:

"The said Baburao alias Vasantrao Dattaji Dhanwatey shall be paid remuneration at the rate of Rs. 1250 (Rupees Twelve Hundred Fifty) per month, the said Marotirao Dattaji Dhanwatey shall be paid remuneration at the rate of Rs. 1000 (Rupees One thousand) per month, the said Shamrao Dattaji Dhanwatey shall be paid remuneration at the rate of Rs. 700 (Rupees Seven hundred) per month, the said Shankarrao Dattaji Dhanwatey and Krishnarao Dattaji Dhanwatey shall each be paid remuneration the rate of Rs. 500 (Rupees five hundred) each out of the gross earnings of the partnership business. This amount of remuneration of any or all can, however, be revised at any time if all the partners agree to revise."

According to this clause the remuneration paid to the various partners shall be paid to them out of the gross earnings of the partnership business. The remuneration provided for Shri V D Dhanwatey was later raised to Rs. 1500 per month. For the accounting period relating to the assessment years 1954-55 and 1955-56 Shri V. D. Dhanwatey had been paid Rs. 18,000 in each year. The assessee showed the said amount in his return in Section D. It was contended on behalf of the appellant that the amount was not taxable because it was the income earned by Shri V. D. Dhanwatey for the services rendered by him to the partnership and the amount constituted his individual income and not the income of the Hindu Undivided Family. It was urged that the said amount should be taxed in the hands of Shri V. D. Dhanwatey in his status as individual and not in his status as karta of the Hindu Undivided Family. The Income Tax Officer rejected the contention of the assessee.