K.S. SUBBIAH PILLAI versus THE COMMISSIONER OF INCOME TAX

Citation: [1999] 1 S.C.R. 980 · Decided: 10-03-1999 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
K.S. SUBBIAH PILLAI 
v. 
THE COMMISSIONER OF INCOME TAX 
MARCH 10, 1999 
[S.P. BHARUCHA, S.S. MOHAMMED QUADRI 
AND R.C. LAHOTI, JJ.) 
Income Tax Act, 1922/lncome Tax Act, 1961 : 
Hindu Undivided Family-Remuneration and Commission eamed by 
Karta-lncome Tax Appellate Tribunal, recording a finding that the 
·. remuneration and commission earned by Karta were 011 account of his 
personal qualifications and exertions-Held, the amounts cannot be treated 
as income of HUF. 
Appellant assessee, a Hindu Undivided Family was assessed in State 
of Tamil Nadu for the assessment years 1959-60 to 1965- 66, 1969-70 and 
1970-71 and in the State of Andhra Pradesh for the assessment years 
1966-67 to 1968-69. The question whether the remuneration and commis-
sion received by the Karla was assessable in the hands of the assessee 
E Hindu Undivided Family, was referred to the High Court at Madras. A 
similar question was referred to the Andhra Pradesh High Court with 
regard to the assessment years 1966-67 to 1968-69. The Andhra Pradesh 
High Court answered the reference in favour of the assessee and the 
Revenue did not file any appeal in that case. The High Court at Madras 
F dissented from the view of the Andhra Pradesh High Court and held 
against the assessee. Aggrieved, the assessee filed the present appeals. 
Allowing the appeals, this Court 
HELD : 1.LThe broad principle that emerged, as rightly concluded 
G by the High Court, was whether the remuneration received by the copar-
cener was in .substance one of the modes of return made to the family 
because of the investment of the family funds in the business or whether 
it was compensation made for services rendered by the individual copar-
cener. If it was the former, it was the income of the HUF; but if it was the. 
H 'iatter, then it was the income of the individual coparcener. [982-C] 
980 
.. 
Jr 
KS. SUBBIAH PILLAI v. C.l.T. (BHARUCHA, J.] 
981 
1.2. The High Court failed to take into consideration the finding A 
... 
recorded by the Income Tax Appellate Tribunal, which is the final fact 
finding authority, that the remuneration and commission that were earned 
by the Karta of the HUF were earned by him on account of his personal 
qualifications and exertions and not on account of the investment of the 
family funds in the company. Therefore, the income could nol. be treated B 
as the income of the HUF. [982-E] 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 877-885 
of 1991. 
From the Judgment and Order dated 11.3.82 of the Madras High c 
Court in T.C. No. 791-94 and 825-29 of 1977. 
Uttam Reddy, AV. Rangam and A Ranganathan for the Appellant. 
K.N. Shukla, T.C. Sharma for B.K. Prasad for the Respondent. 
The Judgment of the Court wad delivered by 
D 
.. 
BHARUCHA., J. In these appeals filed by the assessee, which is a 
Hindu Undivided Family, we are concerned with the Assessment Years 
1959-60 to 1965-66 and 1969-70 and 1970-71. The question that we are 
required to consider reads thus: 
E 
"Whether, on the facts and in the circumstances of the case, 
the remuneration and commission received by Sri K.S.Subbiah 
Pillai was assessable in the hands of the assessee Hindu Undivided 
Family? 
F 
It may be mentioned at the outset that the same assessee was 
assessed in Andhra Pradesh for the Assessment Years 1966-67 to 1968-69. 
The same question arose in regard to those assessments. The question was 
answered on reference by the High Court of Andhra Pradesh in favour of 
the assessee and the Revenue did not carry the matter further. 
G 
The judgment, of the Andhra Pradesh High Court afore-mentioned 
was cited before the High Court at Madras "in the reference proceedings 
;. 
out of which these appeals arise but the Madras High Court dissented 
therefrom. It dilated at length on Hindu Law but, with great respect, 
missed the point that the Income Tax Appellate Tribunal is the final H 
982 
SUPREME COURT REPORTS 
[1999] 1 S.C.R. 
A fact-finding authority and, as it has itself noticed in the judgment under 
challenge, the Tribunal had held that the remuneration and commission 
received by the Karta of the HUF were earned by him on account of his 
personal qualifications and exertions and not on account of the investment 
of the family funds in the company and, therefore, could not be treated as 
the income of the HUF. 
B 
The High Court, having analysed the law, rightly concluded that the 
broad principle that emerged was whether the remuneration received by 
the 

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