INCOME TAX OFFICER v. MOTILAL TEKRIWAL (HUF) - 1985-LL-0118-6

Citation	1985-LL-0118-6
Appellant Name	INCOME TAX OFFICER
Respondent Name	MOTILAL TEKRIWAL (HUF)
Court	ITAT
Relevant Act	Income-tax
Date of Order	18/01/1985
Assessment Year	1978-79, 1979-80
Judgment	View Judgment
Keyword Tags	goodwill of business • individual capacity • partial partition • individual income • karta
Bot Summary:	Shri Motilal, his wife and son, Shri Vinod Kumar constituted HUF. A partial partition was claimed between Vinod Kumar on one hand and Motilal on the other. In the aforesaid clause, Motilal was referred to as the first party and Vinod Kumar was referred to as the second party. The ITO, while framing assessments of the present assessee, namely Motilal for the asst. In the light o f these facts, the only point involved in these two appeals preferred by the department against the orders of the AAC is as to whether the allowance of Rs. 6,000 per annum received by Motilal from the partnership firm should be treated as income of Motilal or Motilal. According to the terms in the deed of partnership, Motilal was to get Rs. 500 per month not only by he being active partner in the firm but also for the goodwill of the business and its place of situation of business which business was previously owned by the bigger HUF. Thus, obviously the contract for getting Rs. 500 per month was not in his individual capacity but in the capacity of Karta of his HUF smaller. The monthly allowance of Rs. 500 was obviously paid to Motilal not only for his personal services but also for goodwill of the business and as such, the contract of partnership was that Motilal would get the same amount of Rs. 500 per month till his death even if he retired form the partnership. In view of these facts the law that remuneration received by a member of HUF from a firm in which the HUF is a partner, is his individual income and not the income of the HUF is not applicable to the instant case.

Shri Motilal, his wife and son, Shri Vinod Kumar constituted HUF. partial partition was claimed between Vinod Kumar on one hand and Motilal on other. Moti Lal claimed to have had formed HUF with his wife even after that partial partition. firm was constituted, Har Narain Motilal by name of which partners were Motilal (HUF) consisting of himself and his wife and Vinod Kumar. Cl. (6) of said deed of partnership provided payment of monthly allowance to partners. It reads as under: "That each party will get monthly allowance of Rs. 500 p.m. and in case even if first party retired from firm, firm will be bound to pay Rs. 500 month till his death in consideration of his services rendered and as goodwill of business and its place and situation of firm by second party." In aforesaid clause, Motilal was referred to as first party and Vinod Kumar was referred to as second party. ITO, while framing assessments of present assessee, namely Motilal (HUF) for asst. yrs. 1978-79 and 1979-80 made addition of Rs. 6,000 in each of years which was received by Motilal as monthly allowance from firm. On appeal, AAC deleted said addition both years. In light o f these facts, only point involved in these two appeals preferred by department against orders of AAC is as to whether allowance of Rs. 6,000 per annum received by Motilal from partnership firm should be treated as income of Motilal (HUF) or Motilal (individual). We have heard ld. representatives of parties. There cannot be any quarrel with proposition that remuneration of member of HUF as partner of firm in which HUF is partner, is individual income of said member of HUF and is not income of HUF. In this connection, reference may be made to CIT vs. D. C. Shah (1969) 73 ITR 692 (SC), Laxman Das vs. CIT (1982) 31 CTR (All) 210: (1982) 138 ITR 628 (SC) cited by ld. representative for assessee. However, in instant case, facts are different. According to terms in deed of partnership, Motilal was to get Rs. 500 per month not only by he being active partner in firm but also for goodwill of business and its place of situation of business which business was previously owned by bigger HUF. Thus, obviously contract for getting Rs. 500 per month was not in his individual capacity but in capacity of Karta of his HUF smaller. monthly allowance of Rs. 500 was obviously paid to Motilal not only for his personal services but also for goodwill of business and as such, contract of partnership was that Motilal would get same amount of Rs. 500 per month till his death even if he retired form partnership. In view of these facts law that remuneration received by member of HUF from firm in which HUF is partner, is his individual income and not income of HUF is not applicable to instant case. Furthermore, that we find is that similar view has been taken earlier by Tribunal in case of this very assessee vide order dt. 11th June, 1981 in I.T.A. No. 707/All/1980. We are respectfully in agreement with that view and we have no reason to depart therefrom. orders of AAC for both years are, therefore, set aside and instead those of ITO are restored. In result, both appeals are allowed. *** INCOME TAX OFFICER v. MOTILAL TEKRIWAL (HUF)

Metadata

Judgment