S. RM. CT. PL. PALANI APPA CHETTIAR versus THE COMMISSIONER OF INCOME-TAX, MADRAS

Citation: [1968] 2 S.C.R. 55 · Decided: 26-10-1967 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

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A 
S. RM. CT. PL. PALANI APPA CHETI1AR 
v. 
THE COMMISSIOl'll'ER OF INCOME-TAX, MADRAS 
October 26, 1967 
B 
[K. N. WANCHOO, C.J., R. S. BACHAWAT, 
V. R.AMASWAMI, 
c 
D 
E 
F 
G 
G. K. MITTER AND K. S. HEGDE, JJ.j 
Indian Incon1e-tax Act ( 11 o/ 1922)-Hindu undil,.ided famil_v .. rhares 
acquired fro111 funds o/-Re111unera1ion of karta as A-fanaging Director-
Whetlter inco111e of the family. 
Out of the funds of ·a Hindu undivided family, 90 shares out of 300 
!'hares of :i. company were purchased. After a fe\ll years the Karta of 
the family became a director of the company and y:a.~ later appointed its 
Managing Director. The Income-tax Officer added the remuneration of 
the karta for the assessment of the Hindu undivided family and on the 
basis of the decision of this Court in The C.l.T. West Bengal v. Kalu Bahu 
Lal Chand held that the remuneration was to be treated as income of the 
family. The assessec appealed unsuccessfully to the Appellate Assistant 
Commissioner, but the Tribunal accepted the assessee's plea. 
On referw 
ence, the High Court answered in favour of the Revenue holding that it. 
decision in C.J.1'. Madras v. S. N. N. Sankcralinga Iyer wa~ not authorita-
tive as this Court has subsequently impliedly 
overruled that decision in 
The C.l.T. West Be111tal v. Kalu Babu Lal Chand and the later decision of 
this Court in MI s. Piyare Lal A dish war Lal v. The ·c.1. T. Delhi was dis-
tinguishable. 
In appeal, this Court-
HELD : The remuneration of the Managing Director could not 
be 
treated a'\ an accretion to the income of the joint family and taxed in ill\ 
hands. 
The shares. in this case, were purchased by the joint family not 
with the object that the karta should become the M\inaging Director but 
in the ordinary course of investment. 
There was no real conaection be-
twoon the investment of joint family funds in the purchase of the shares 
and the appointment of karta as managing director of the com.pany. 
Applying the doctrine of Hindu Law, the remuneration of the managjng 
diriX:tor 
was not earned by any 
d~triment to the joint family 
assets. 
I 59H-60B. Fl 
The present case did not fall within the principle of this Court's deci-
sion in C./. T. West Bengal v. Ka/u Babu Lal Chand but bore analogy to 
this C.ourt's decision in Mis. Piyare Lal Adishwar Lal v. The C.l.T. Delhi. 
The deci•ion of the Madras High Court in 
C.l.T. Madras v. S. N. N. 
Sankara/ing" Iyer was not impliedly over-ruled by this Court in CJ.T. 
West Bengal v. Ka/11 Bahu Lal Chand but was distinguished. The facts in 
the present case are almost paraJlcl to thoSc in C./. T. i\fadr<zs v. S. N. N. 
Sankaralinga Iyer. 
[60D·F] 
MI s. Piyare Lal Chand Adhishwar Lal v. The C.l.T., Delhi [1960] 3 
S.C.R. 669, followed. 
. 
The C.I. T. West Bengal v. Kali• Babu Lal Chand 
[1960] 1 S.C.R. 
320, distinguished. 
. C.l.T. Madrav v. S. N. N. Sankaralinga Iyer, 18 I.T.R. 194 referred 
H 
lb. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1055 of 
1966. 
5 fi 
SUPREME COURT REPORTS 
il968] 2 S.C.R. 
Appeal from the judgment and order dated October 17, 1963 
A 
or the Madras High Court in T.C. No. 151 of 1962. 
R. Gopa/akrishnan, for the appellant. 
T. A. Ramachandran and "R. N. Sachthey, for the respondent. 
The Judgment of the Court was delivered by 
Ramaswami, J. 
This appeal is brought, by certificate, from 
the judgment of the Madras High Court in T.C. No 151 of 1962 
d:1ted October 17, 1963. 
B 
The appellant (hereinafter referred to as the 'assesscc') is a 
Hindu Undivided Family consisting of the father and four major· 
sons. 
The assessee became a share-holder in 
the Trichv-Sri 
C 
Rangam Transport Company Ltd. (hereinafter referred to as the 
·company·) in 1934 and owned 90 shares out of the 300 sham; 
of the company. 
The shares were acquired with the funds of the 
Hindu Undivided family of the father and hio; four major sons. 
There were initially four shareholders including the assessee, two 
of whom were directors. 
On the death of one of the Directors, the 
assessee became a director in 1941 and on the death of another 
director who was managing the business the assessee became the 
Managing Director with effect from 1942. 
By a resolution dated 
April 16, I 944 the company granted him an honorarium of 
Rs. 3,000 for the year 1943-44 and subsequently rai.sdd it gra-
dually till it became .Rs. 1,000 per month with 12!% commission 
on the net profits of the company. 
The Managing Director had 
control over 

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