# M/S. PIYARE LAL ADISHWAR LAL v. THE COMMISSIONER OF INCOME-TAX, DELHI

- **Citation:** [1960] 3 S.C.R. 669
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Bench:** S. K. Das, J. L. Kapur, M. Hidayatullah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-piyare-lal-adishwar-lal-v-the-commissioner-of-income-tax-delhi-1888
- **Pages:** 12

## Headnote

Income Tax-Agreement between Treasurer and Bank--Construction-Treasur~r, whether servant of Bank-Treasurer furnishing security of joint family property-Emoluments received
by
Treasurer, whether income of joint f amily-lndian Income-tax Act,
1922 (1] of 1922) SS. 7 JO.
S was the karta of the Hindu undivided family, consisting of
himself and his younger brother. Their father was the Treasurer
of a Bank till his death in 1950.
During his father's lifetime S
was employed as an overseer in the Bank on a salary of Rs. 400
a month, and, subsequently,
after his father's death · he was
appointed Treasurer of the
Bank at Delhi
and sixteen
other
branches of the Bank.
As Treasurer he furnished security to the
Bank of ceriain properties of the Hindu undivided family.
The
agreement dated September 19, 1950, between him and the Bank,
showed that he was appointed Treasurer on a monthly salary of
Rs. 1,750 and he
was also paid
certain sums of
money for
guaranteeing the conduct of the cashiers and other members of
the Cash Department Staff which he was . required to employ
with the
approval of the Bank.
He was to carry out his ·duties
as directed by the Bank and if in the discharge of his duties he
caused. any loss to the Bank he was liable to make good the loss.
He was not required to serve personally, but his services could be
terminated by notice. In the vear of account 1950-51 he received
from the Bank a sum of Rs. 23.286 as Treasurer. The Income-tax
authorities considered
that this sum
was not the
individual
income of S as salary but was part of the income of the Hindu
undivided family and taxed it as such on the grounds (1) that
the agreement between S and the Bank showed that the relationship between them was no~ one of master and servant but that
of an employer and independent contractor and that the emoluments
received by
the
Treasurer were
profits and gains of
business, (2) that
S was appointed Treasurer not on account of
any personal qualification but because his father was a Treasurer
--r- of the Bank before him, and (3) that as the security furnished by
S came out of the joint family properties, the emoluments could
IJOt be said to have been earned without detriment to the family
property and therefore were part of the Hindu undivided family:
Held, (1) That on the
true construction
of the agreement
dated September 19, 1950,
the Treasurer was a servant of the
Bank.
Sivanandan Sharma v. The Puniab National Bank Ltd. [1955]
1 S.C.R. 1427 and Dharangadlzara Chemical Works Ltd. v. State of
Saurashtra, [1957] S.C.R. 152, relied on.
(2) That in view of the fact that there was nothing to show
that S had received any particular training at the expense of the
23-6 SCI/ND/82
1960
April 26.
196G
Piyare
Lal
Adishwar Lai
v.
Commissioner of
Income-tax,
Delhi
•
Kapur J.
670
SUPREME COURT REPORTS
[1960]
family funds or that his appointmen_t as Treasurer was the result
of any
outlay or
expenditure of or
detriment to the family
property, but on the other hand his previous experience as an
overseer of the
Bank was indicative of personal fitness for his
appointment as
Treasurer, the mere fact he
had lodged joint
family property by way of security would not make his earnings
as Treasurer part of the income of the Hindu undivided family.
The use of the
words
"risk of"
and
"detriment to"
in
Gokul Chand v. Firm Hukum Chand Nath Mal, (1921) L.R. 48
I.A. 162, explained.
Commissioner of Income-tax v. Kalu Babu Lal Chand, [1960]
1 S.C.R. 320, distinguished.
Accordingly,
the emoluments received
by S were
in the
nature of salary and therccore assessable under s. 7 of the Indian
Incom<;-tax Act, 1922, and not under s. 10 of the Act as profits
and gains of business, and the salary
was the income of the
individual, S, and not the income of the Hindu undivided family.
CrvIL APPELLATE JimrsmcTION: Civil Appeal No.
123 of 1957.
Appeal from the judgment and order dated May
12, 1955, of the Punjab High Court in Civil Reference
No. l 7 /1953.
.
A. V. Viswanatha Sastri,

## Text

-. .:
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l'
3 S.C.R.
SUPREME COURT REPORTS
669
M/S. PIYARE LAL ADISHWAR LAL
v.
THE COMMISSIONER OF INCOME-TAX, DELHI.
(S. K. DAS, J. L. KAPUR and M. HIDAYATULLAH, JJ.)
Income Tax-Agreement between Treasurer and Bank--Construction-Treasur~r, whether servant of Bank-Treasurer furnishing security of joint family property-Emoluments received
by
Treasurer, whether income of joint f amily-lndian Income-tax Act,
1922 (1] of 1922) SS. 7 JO.
S was the karta of the Hindu undivided family, consisting of
himself and his younger brother. Their father was the Treasurer
of a Bank till his death in 1950.
During his father's lifetime S
was employed as an overseer in the Bank on a salary of Rs. 400
a month, and, subsequently,
after his father's death · he was
appointed Treasurer of the
Bank at Delhi
and sixteen
other
branches of the Bank.
As Treasurer he furnished security to the
Bank of ceriain properties of the Hindu undivided family.
The
agreement dated September 19, 1950, between him and the Bank,
showed that he was appointed Treasurer on a monthly salary of
Rs. 1,750 and he
was also paid
certain sums of
money for
guaranteeing the conduct of the cashiers and other members of
the Cash Department Staff which he was . required to employ
with the
approval of the Bank.
He was to carry out his ·duties
as directed by the Bank and if in the discharge of his duties he
caused. any loss to the Bank he was liable to make good the loss.
He was not required to serve personally, but his services could be
terminated by notice. In the vear of account 1950-51 he received
from the Bank a sum of Rs. 23.286 as Treasurer. The Income-tax
authorities considered
that this sum
was not the
individual
income of S as salary but was part of the income of the Hindu
undivided family and taxed it as such on the grounds (1) that
the agreement between S and the Bank showed that the relationship between them was no~ one of master and servant but that
of an employer and independent contractor and that the emoluments
received by
the
Treasurer were
profits and gains of
business, (2) that
S was appointed Treasurer not on account of
any personal qualification but because his father was a Treasurer
--r- of the Bank before him, and (3) that as the security furnished by
S came out of the joint family properties, the emoluments could
IJOt be said to have been earned without detriment to the family
property and therefore were part of the Hindu undivided family:
Held, (1) That on the
true construction
of the agreement
dated September 19, 1950,
the Treasurer was a servant of the
Bank.
Sivanandan Sharma v. The Puniab National Bank Ltd. [1955]
1 S.C.R. 1427 and Dharangadlzara Chemical Works Ltd. v. State of
Saurashtra, [1957] S.C.R. 152, relied on.
(2) That in view of the fact that there was nothing to show
that S had received any particular training at the expense of the
23-6 SCI/ND/82
1960
April 26.
196G
Piyare
Lal
Adishwar Lai
v.
Commissioner of
Income-tax,
Delhi
•
Kapur J.
670
SUPREME COURT REPORTS
[1960]
family funds or that his appointmen_t as Treasurer was the result
of any
outlay or
expenditure of or
detriment to the family
property, but on the other hand his previous experience as an
overseer of the
Bank was indicative of personal fitness for his
appointment as
Treasurer, the mere fact he
had lodged joint
family property by way of security would not make his earnings
as Treasurer part of the income of the Hindu undivided family.
The use of the
words
"risk of"
and
"detriment to"
in
Gokul Chand v. Firm Hukum Chand Nath Mal, (1921) L.R. 48
I.A. 162, explained.
Commissioner of Income-tax v. Kalu Babu Lal Chand, [1960]
1 S.C.R. 320, distinguished.
Accordingly,
the emoluments received
by S were
in the
nature of salary and therccore assessable under s. 7 of the Indian
Incom<;-tax Act, 1922, and not under s. 10 of the Act as profits
and gains of business, and the salary
was the income of the
individual, S, and not the income of the Hindu undivided family.
CrvIL APPELLATE JimrsmcTION: Civil Appeal No.
123 of 1957.
Appeal from the judgment and order dated May
12, 1955, of the Punjab High Court in Civil Reference
No. l 7 /1953.
.
A. V. Viswanatha Sastri, S. N. Andley, ]. B. Dadachanji, Ramcshwar Nath and P. L. Vohra,
for
the
appellants.
C. K. Daphtary, Solicitor-General of India, R. Ganapathy Iyer and D. Gupta, for the respondent.
1960. April 26. The Judgment of the Court was
delivered by
KAPUR, J.-This is an appeal against the judgment
and order of the High Court of Punjab made on a
reference under s. 66(1) of the Indian Income-tax Act
which was answered in favour of the Commissioner
of Income-tax. The appellant is the assessee-a Hindu
undivided family-with Sheel Chandra as its Karta
and the respondent is the Commissioner of Income-tax.
The appeal relates to the assessment year 1951-!>2.
The appellant, a Hindu undivicjed family, consisted
of Sheel Chandra and his younger brother.
Their
father, Adishwar Lal, upto his death on April 16, 1950,
was the Treasurer of several branches of the Central
Bank of India (which in the judgment will be referred
to as the Bank).
During his father's lifetime Sheel
Chandra was employed as an Overseer in the
Bank
on a salary of Rs. 400 a month.
Sheel Chandra was
appointed Treasurer of the Bank at Delhi and sixteen
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-
3 S.C.R.
SUPREME COURT REPORTS
671
other branches of the Bank. As Treasurer he furnished security to the Bank of certain properties of the
Hindu undivided family, which consisted of title deeds
of immovable properties
in Chandni Chowk, Delhi,
and Government of India securities of -the value of
Rs. 75,000.
The Hindu undivided family owns considerable property.
Its income from house property
alone is Rs. 50,000 per annum 'lnd it owns stocks,
shares and Government securities also of considerable
value.
As Treasurer Sheel Chandra received in
the
year of account from the Bank a sum of Rs. 23,286
and the question for decision is whether this sum is
the individual income of Sheel Chandra as salary or it
is part of the income of the Hindu undivided family.
The Income-tax Authorities held this sum to .be the
latter and taxed it as such.
The Income-tax Appellate Tribunal in upholding this view held that on a
proper construction· of the written agreement between
Sheel Chandra and the Bank, the emoluments received
by the Treasurer were profits and gains of business
and it further held1 that as the security furnished by
Sheel Chandra came out of the joint family properties, the emoluments could not be said to have been
earned without detriment to the family property and
therefore were part of the income of the Hindu undivided family.
At the instance of the appellant the
Tribunal referred under s. 66(1) the following
two
questions to the High Court: -
(1) "Whether in the facts and circumstances of
the case and on a true construction of the agreement between the Central Bank of India and Sheel
Chandra the salary and other emoluments received
by Sheel Chandra as Treasurer of the said Bank are
assessable under the head 'salary' or
under the
head 'Profits and gains of business'."
(2) "Whether in the facts and circumstances of
the case, Sheel Chandra's emoluments as Treasurer
of the Central Bank of India Ltd.
were rightly
assessed in the hands of the Hindu undivided family
of which he is the Karta".
Both questions were answered against the appellant.
On a consideration of the various clauses of the
agreement between Sheel Chandra and the Bank, the
1960
Piyare Lal
Arlishwar Lal
v.
Commissioner of
income-tax,
Delhi
Kapur J.
1960
Pi_yare Lal
Adishwar Lal
v.
Commissioner of
lncome~tax,
Delhi
Kap11r j.
672
SUPREME COURT REPORTS
[1960]
High Court held that the relationship between them
was not one of master and servant but that
of
an
employer and independent contractor and therefore the
emoluments received by Sheel Chandra as Treasurer
were not salary but profits and gains of
business.
As to the second question the High Court was of the
opinion that the emoluments were the income of the
Hindu undivided family because Sheel Chandra was
not appointed Treasurer on account of any personal
qualification but
be was appointed becanse (a) his
father was a Treasurer of the Bank before him and (b)
he had furnished substantial security which was part
of the property of the
Hindu
undivided
family.
Against this judgment and order the appellant
has
come in appeal to this Court.
The nature of the employment of Sheel Chandra
has to be gathered from the agreement dated September 19, 1950, between him and the Bank.
It shows
that on his application for appointment as a Treasurer
at "Delhi and sixteen other branches of the Bank, the
Bank appointed him Treasurer for those branches and
he could, by mutual agTcement, be appointed at other
branches in the Punjab, U. P. and Rajasthan.
The
appointment took effect from April 16, 1950.
Sheel
Chandra undertook to perform the duties and
be
responsible as Treasurer of the various branches of
the Bank and was required to engage and employ
subordinate staff called
the Cash Department Staff
such as Head Cashiers, Cashiers, Potdars, Guaranteed
Peons, Godown Keepers, Assistant Godown Keepers,
Chowkidars and Clerks and other persons necessary
for the efficient working of the said offices.
He
h~:l
the power to "control, dismiss and change" this Staff
at his pleasure but he could not engage or transfer
any member of the Staff except with the approval of
the Bank and had to dismiss any such member if so
required by the Managing Director of the
Bank or
Agent of the Office.
The Treasurer and the Cash Department Staff were
to do and be responsible for all work in connection
with receipts and payments of monies and bad to do
such other work as was customarily done by cashiers
1
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3 S.C.R.
SUPREME COURT REPORTS
673
and shroffs of Banks. The Treasurer was also responsible for the correctness and
genuineness of all
hundies and cheques bearing signatures and endorsements in vernacular and for genuineness of all signatures and writings in any language or character
or
any securities, voucher deeds, documen_ts and writings
which the Treasurer or. the Cash Department
Staff
dealt with and in case of any loss or damage arising
out of any
forged signatures and endorsements on
any document accepted or dealt with by the
Cash
Department Staff as correct and geni1ine, the Treasurer
was responsible to make good the loss.
He was also
required,· when asked by
the Bank, to engage
the
necessary staff, to look after the goods pledged with
the Bank and he was responsible for the good conduct
of such staff.
It was also his duty to make enquiries
and report upon the identity, credit and solvency of
persons dealing with the Bank and was liable for any
loss arising out of any
wilful misrepre,sentation or
negligence in the enquiry or report made by him or
his representative in any matter arising in the · course
of employment.
He or his representative were
also
required, when asked, to give reliable information in
regard to hundi business but he was not responsible
for any damage or loss arising therefrom.
He
also
undertook when required by the Officers of the Bank
to value and give correct certificate in regard to the
genuineness, fineness and weight of bullion and gold
ornaments and other
valuable
pledged
with
the
Bank.
He was responsible for any loss to the
Bank
in case of any wilful misrepresentation or negligence
in regard to this branch of his
duty.
He
further
undertook to supply to the Bank as many persons as
were required at the various branches of the
Bank
which the Bank opened in future.
He undertook responsibility for the safe custody of
the nionies and
ornaments and other valuables· kept with or pledged
with the Bank as also for the . Bills of exchange, promissory notes, hundies
or other securities.
Besides
.this he was required to satisfy the
Agent
~r
the
¥anager of the branch that all the monies of the Bank
fq1id other valuable securities which had not been duly
1960
Piyare Lal
Adishwar Lal
v.
CommissiotJer of
Income.tax,
Delhi
Kapur].
1960
Pi.yare
Lnl
Adishwar Lal
v.
Commissiontr of
Income-tax,
!Jelhi
Kapur J.
674
SUPREME COURT REPORTS
[1960]
used and accounted for were intact and in their proper
places.
Sheel Chandra was paid a salary of Rs. 1,750 per
mensum for all the branches
he was
employed in.
Besides this he was paid certain sums of money for
guaranteeing the conduct of Godown Keepers,
Assistant Godown Keepers and Chowkidars supplied
by
him. If the branches or out-agencies were
increased
he was to receive such increase in salary
as
might
mutually be agreed upon.
On the closing of any
branch there was to be a corresponding reduction in
the remuneration. The members of the Cash Department Staff were
to
be paid travelling
allowance
according to the rules of the Bank.
In addition to
the remuneration above mentioned the Treasurer or
his authorised representative when
v1s1tmg
different
branches were to get actual railway fare. The various
members of the Cash Department Staff
were to be
paid their salary directly by the Bank but the Bank
was not bound to pay more than the scale laid down
by it.
The permanent members of the Cash Department Staff were to get the usual increments and benefit of Provident Fund and travelling allowance
in
accordance with the rules of the Bank. The Treasurer
was required to engage members of the Cash Staff on
salaries laid down by the Bank and if he paid anything more than the usual Bank scale he had to pay
it himself.
The Treasurer was also entitled to nominate and appoint a representative to carry on
the
duties undertaken by him at the various offices of the
Bank but these appointments were subject to
the
approval of the Bank.
The Treasurer was responsible for the acts of omission and commission and for neglect and default of
his representatives and for each and every member of
the Cash Department Staff. There are various clauses
in the agreement requiring the Treasurer or his representative to perform their duties efficiently, honestly
and in a proper manner.
The Treasurer ' and
the
Cash Department Staff were under t.he control of· the
Bank. "They were required to make enquiries in the
books of account which were furnished by the
Bank
giving full particulars of all monies received and paid
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1
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. .
3 S.C.R.
SUPREME COURT REPORTS
675
1960
by them and in such manner as the Agent of the
Bank might from time to time direct in writing.
The
Treasurer had to carry out his duties faithfully and
Jtf,:ar Lfat
any communication made by the Bank to any member
v.
of the Cash Department Staff was to be considered as
Commissioner •f
d
lncomt-tax,
a communication made to the Treasurer himself an
Delhi
he was bound to take notice of it.
The agreement
could be terminated by three calendar months' notice
iIJ writing by either side
but in the event of
any
breach of any condition of the agreement by the Treasurer his services could be terminated forthwith; but
his liability was to continue. There was also an arbitration clause.
Counsel for
the appellant contended
that the
various provisions of the agreement showed that Sheel
Chandra was a servant· of the Bank and not an indep~ndent contractor.
He
laid particular emphasis
on the fact that he was appointed a
Treasurer on a
monthly salary and his services could be terminated
forthwith in
certain circumstances.
Besides this he
w~s to carry out his duties as directed by the
Bank
and was to discharge his duties faithfully and if in the
discharge of his duties he caused any loss to the Bank
he wa·s liable to make good the loss.
These factors,
according to him, showed that he was
not an
independent contrnctor or an agent of the Bank but was
a salaried servant. The contention on behalf of the
respondent on the other hand was that the agreement '
showed that Sheel Chandra was carrying on a business
in that he was supplying cashiers and other members
of the Cash Department Staff for a monetary
consideration.
He guaranteed their fidelity which was an
insurance undertaken by him.
He was to get certain
sums of money for supplying each member of certain
classes of servants to the Bank and the
agreement
between the Bank and Sheel Chandra could be terminated by notice and there was an arbitration
clause
and he was not required to serve personally.
Undoubtedly there are some terms in the agreement
which are unusual as ordinary agreements of service
go but in the case of an agreement between a
Bank
and a Treasurer they are not so unusual.
There was
Kapur J.
1960
Pi)•are
Lal
Adishwar Lal
v.
Comrnissio11er
of
l11conu-tax,
Delhi
Kapur J.
676
SUPREME COURT REPORTS
[1960]
an agreement
with very
similar dauses in
Shivanandan Sharma v. The Punjab National Bank Ltd. (')
and it was held to be an agreement of service and not
of agency.
Now, the duties of Sheel Chandra under the agreement are such as are peculiar to the employment of
Treasurers.
It
is true that as
Treasurer,
Sheel
Chandra had also undertaken to indemnify the Bank
not only for his own default but also for the default
of the members of the Cash Department Staff.
But
Banks have to deal with monies, valuable securities,
g<;lld and other valuables and must necessarily employ
servants whose honesty is guaranteed and it is necessary for the Bank to have someone in its employment
wLo can perform these duties in a respon·sible manner
and be answerable to the Bank for negligence and
default in the performance of this class of work.
In
the very nature of things one man cannot do all this
work, not even at one branch, what to say of several
branches; other people have therefore to be employee!
and although the persons. employed
in
the
Cash
Departi:nent are servants of the Bank
they
do
the
work which Treasurers ordinarily and customarily do
and consequently the Treasurer is made responsible
for any damage which the Bank
suffers
due to the
default of the Treasurer or of those em ployed to do
the work of the Cash Department.
It is difficult' to lay clown any one test to distinguish
the relationship of master and servant from that of an
employer and independent contractor.
In many cases
the test laid clown is that in the case of master and
servant the master can order or require what is to be
done and how it is to be clone but in the case of an independent contractor an employer can only say what
is to be done but not how it shall be done. But this
test also does not apply to all cases, e.g., in the case
of Ship's master, a chauffeur or a reporter of a newspaper.
It was pointed out in Cassid)' v. Ministry of
Health (') that in the case of contract of service "a
man is employed as part of the business, and his work
is done as an integral part of the business whereas
under a contract for services the contractor
is
not
(I) (195c•] 1 S.C.R. 112i.
(2)
[1951] 2 K.B. 343, 352·3.
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3 S.C.R.
SUPREME COURT REPORTS
677
·integrated into the business but is only accessory to
it". In certam cases it has been laid down that the
indicia of a contract of service are (a) the
master's
power of selection of the servant; (b) the payment of
wages or other remunerations; (c) the master's right
to control the method of doing the work and (d) the
master's right
of suspension or dismissal:
Short v.
I and Henderson Ltd. (1).
Bhagwati, J., in Dharangadhara Chemical Works Ltd. v. State of Saurashtra (2)
said that in all cases the correct method of approach
is whether having regard to the nature of work there
was due control and supervision by the employer.
We have given above the duties of the Treasurer in
the present case, his obligations and the manner of
control exercised over him and the staff employed by
him to carry out the work of the Cash Department of
the Bank.
It is no doubt true that the Treasurer
guaranteed his fidelity, good faitl). and ho;nesty of the
persons who were employed in the Cash Department
of the Bank but that was a part of the duty that he
undertook and that is peculiar to the very nature of
his' employment.
Applying the test which was laid
down by Bhagwati, J., in
Dharangadhara Chemical
Works Ltd. v. State
of Saur0;5htra (') that
having
regard to the nature of the work whether there was
due control and supervision of
the Bank over the
Treasurer, the Treasurer in the instant case must be
held to be a servant of the Bank.
What we have to
see is the effect of the agreement as a whole and
taking the various clauses together it must be held
that Sheel Chandra, the Treasurer, was a servant of
the Bank.
In view of this it is not necessary to discuss in detail the various cases that were cited ·at the
bar. K. P. Bhargava v. The Commissioner vf IncomeTax, U. P. (') was the case of .a Treasurer of the
Central Bank of India at Agra.
There he was paid a
salary of Rs. I 00 and a commission for his work as
a Guarantee Commission Agent but the terms of the
contract were different and that was clearly a case of
a Guarantee Commission Agency.
(I) 62 T.L.R. 427, 429.
(2)
[1957] S.C.R. 152, 160.
(3) [1954] 26 I.T.R, 489.
.
24-6 SCI/ND/82
1960
Piyare Lal
Adishwar Lal
v.
CommisJioner of
In.come-tax,
Dell;ii
Kapur J.
1960
Piyare Lal
Adishwar Lal
v.
678
SUPREME COURT REPORTS
[1960)
Lala ]eewan Lal v. Commissione1· of lncome·lax (')'
was also a case of commission agency and in the pecu·
liar circumstances of that case
it was
held to be
business within s. 2(5) of the Excess Profits Tax Act.
Commissiontr of The assessee there was paid a commission of 4· annas
Income·tax,
per cent. on the value of the contracts secured b)' him.
Delhi
Kapur J.
Subsequently the commission was increased to Re. 1
per cent. and for this extra commission he agreed to
reimburse the m.ill in case of failure of a person purchasing through him to pay the price. Counsel for the
respondent: also relied on Commissioner of hu:om.c-fa."
v. Kalu Babu Lal Chand
(') where· the
Managing
Director's remuneration was held to be the income of
a joint family to be assessed as such in its hands. That
case is distinguishable.
There the karta of a
Hindu
undivided family took over a business as a going concern and carried on the business till the company was
incorporated.
The shares in the name of karta and
his brother were acquired with the funds of the joint
family.
The company was floated with the funds of
the joint family and
was financed by
it and the
remuneration received was credited in the
books
of
the family.
The office of the Managing Director itself
was assignable.
The Articles of Association provided
that the karta or his assigns or successors in bu~iness
"whether under his name or any other style or firm"
would be the Managing Director of the Company and
he was to continue for life until removed because of
fraud or dishonesty. Thus the acquisition of business.
the floatation of the Company and the appointment of
the
Managing
Director
were
inseparably
linked
together. The facts of that case were quite different
from that of the present case which are akin to the
facts in Shivanandan Sharma v. Punjab National Bank
Ltd. (').
The next question for decision is whether the salary
of Sheel Chandra as Treasurer of the Bank is assessable as part of. the income of Hindu undivided family
of which he is the karta or as his separate income.
Both the Appellate Tribunal and the High Court were
of the opinion that the emoluments as Trea.mrer wer<>
not acquired without any detriment and risk to the
(1)
[1953] 24 l.T.R. 217,
(2)
[19GOJ 1 S.C.R. 320.
(3)
[19.\51 1 $.C.R. 1427.
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·3 S.C.R.
SUPREME COURT REPORTS
679
family
property
and
therefore formed part of the
• income of the ~indu undivided family.
Treasurership
1s an employment of responsibility, trust and fidelity
and personal integrity and ability and mere ability to
furnish a substantial security is not the sole or even the
main reason for being appointed to such a responsible
post in a Bank. like the Central Bank of tlndia. On the
other hand his previous experience as an Overseer of
the Bank and bis being appointed on his applying for
the post are indicative of personal fitness for it.
There is nothing to show that Sheel Chandra had
received any particular training at the expense of the
family funds or his appointment was the result of any
outlay or expenditure of or detriment to· the
family
property. But it was argued on behalf of the respondent
that because he had lodged joint family. property by
way of security his earnings as Treasurer became a
part of the income of the Hindu undivided family for
the reason that the acquisition was not without risk
to the family estate.
He relied on Gokul Chand v.
Firm Hukum Chand Nath Mal (1) and Commissioner of
lncome-ta.x v. Kalu Ba.bu Lal Chand (').
In the former
, case a member of the joint family entered the Civil
Service and that was made possible by the expenditure
of family funds which enabled him
to acquire the
necessary
qualifications and it was that fact which
made his earnmgs part of the family mcome.
The
following passage m that
judgment
at p. 168 was
emphasised: -
"It may be said to be direct in the one case and
remote in the other, but if risk of or detriment to
family property is the point in both cases, there
appears to be no such merit in "science"; recognised by the sages of the Hindu law, as would warrant
the exclusion of gains of science as such from the
category of partible acquisitions".
Counsel particularly relied on the words 'risk of' and
contended that by reason of the family property being
given in security, the risk as understood in that judgment had arisen, because it became liable for any loss
that might be incurred during the course of employ~
ment of Sheel Chandra.
The word 'risk' in that
(1) [1921] 48 I.A. 162.
(2) [1960] 1 S.C.R. 320.
1960
Piyare Lal
Adishwar Lal
v.
Copzmissioner of
Income-tax,
Delhi
Kapur].
1960
Piyare Lal
Adishwar Lal
v.
Comrnissioner of
Income-tax,
Delhi
Kapur J.
680
SL'PREME COURT REPORTS
[1960]
judgment must be read in the context in which it was
used.
Family estate was used and
expenditure was
incurred for equipping one of its members to join the
Indian Civil Service. It was in that connection
that
the words 'risk of' or 'detriment to' family property·
were used.
The latter case, Kalu Babu Lal Chau.d's
case ('), has already been discussed.
The
facts
and
circumstances of that case were different.
The cases which the Privy Council relied upon in
Gokul Chand's case (~were all cases where joint family
funds had been expended to fit a member of the joint
family for the particular profession or avocation the
income of which was the subject matter of dispute but
the respondents were not able to refer to any decision
in which it was held that the mere fact of giving joint
family property in security for the good conduct of a
member of the family employed in a post
of
trust
was sufficient to make the emoluments of the post
joint family property because of
any detriment
to
family property or risk of loss. It has not been shown
that in this case there was any detriment to the family
property within the meaning of the term as used in
decided cases.
In our opinion the judgment of the High Court was
erroneous on both questions which were referred to it
and they should both have been decided in favour of
the appellant.
The emoluments received by Sheel Chandra were in
the nature of salary and therefore assessable
under
s. 7 of the Income-tax Act and not under s. 10 of the
Act as profits and gains of business and the salary was
the income of the individual, i.e., Sheel Chandra and
not the income of the Hindu undivided family.
\Ve therefore allow this appeal and set aside the
judgment and order of the High Court. The appellant
will have its costs in this Court as well as in
the
High Court.
Appeal allowed.
(I) [19GO] I S.C.R. 320.
(2) [1921] 4B LA. IG2.
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