# K.S. SUBBIAH PILLAI v. THE COMMISSIONER OF INCOME TAX

- **Citation:** [1999] 1 S.C.R. 980
- **Court:** Supreme Court of India
- **Decided:** 1999-03-10
- **Case number:** Civil Appeal Nos. 877-885 of 1991
- **Bench:** S.P. Bharucha, S.S. Mohammed Quadri, R.C. Lahoti
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-s-subbiah-pillai-v-the-commissioner-of-income-tax-16608
- **Pages:** 3

## Headnote

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 commission 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 coparcener 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 coparcener. 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]

## Text

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 commission 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 coparcener 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 coparcener. 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 coparcener 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
C whether it was compensation made for services rendered by the individual
coparcener. If it was the former, it was the income of the HUF: but if it
was the latter, then it was the income of the individual coparcener. Applying this test, the High Court held, "There is absolutely no evidence to
support the contention of the learned counsel for the assessee that the
development of the business was due to any peculiar qualification or
D experience on the part of the assessee. "
We cannot agree. Having analysed the law, as "it did correctly, the
High Court should have taken note of the finding recorded by the Tribunal
and noticed by it earlier, namely, that the remuneration and commission
E that were earned by the Karta were earned by him 011 account of his
personal qualifications and exertions and not on account of the investment
of the family funds and, therefore, should have held that the -income could
not be treated as the Income of the HUF.
In the result, the appeals are allowed. The judgment and order under
p appeal is set aside. The question is answered in the negative and in favour
of the assessee. No order as to costs.
R.P.
Appeals allowed.
\.