HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax, Bangalore v. Shri D. C. Shah
Civil Appeals Nos. 817 and 818 of 1966
[1969] 3 SCR 586 ·
Indian Income-tax Act, 1922 (historical assessment of HUF and individual income) · Indian Partnership Act, 1932 (partnership-deed context)
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by V. Ramaswami, J. · J. C. Shah, J. · V. Ramaswami, J. · A. N. Grover, J.
Assessment years: 1959-60, 1960-61
01 · Facts of the case
The respondent HUF participated through its karta, D. C. Shah, in C. U. Shah & Co. and Oriental Can Manufacturing Co. D. C. Shah received Rs.12,000 per year from the first firm in both assessment years and Rs.10,000 from the second firm for 1959-60. The HUF's returns included the amounts, and the Income-tax Officer assessed them as part of its partnership income. The partnership deeds made D. C. Shah managing partner of C. U. Shah & Co., with broad management powers and Rs.1,000 monthly remuneration, and provided that he would succeed the retiring managing partner of Oriental Can Manufacturing Co. The Appellate Assistant Commissioner treated the remuneration as D. C. Shah's personal income; the Tribunal reversed, but the Mysore High Court held that it was not HUF income (SCR pp.587-589; PDF pp.2-4).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The Court surveyed its decisions distinguishing remuneration directly related to HUF investment from remuneration attributable to personal services. Where a karta became partner because of family capital and the payment was effectively an enlarged profit share, the income belonged to the family. Conversely, where shares or capital were ordinary family investments and there was no real connection between them and the managerial appointment, remuneration for the karta's work was individual income. The governing inquiry looked to the receipt's source, its relation to family assets and the proximity of the connection between the investment and payment (SCR pp.589-591; PDF pp.4-6). D. C. Shah had rich experience in the firms' line of business. The deeds showed payment for specific managing acts and personal qualifications; another person initially managed the second firm, no other partner drew salary, and there was no real or sufficient connection between family capital and remuneration. The payment was not earned through detriment to HUF assets (SCR p.591; PDF p.6).
Source: Primary judgment: discussion
03 · Judicial decision
The Court held that D. C. Shah's managing-partner remuneration from both firms was not assessable as income of the HUF. Revenue's two appeals were dismissed with costs; one hearing fee was awarded (SCR p.591; PDF p.6).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Shri D. C. Shah/the respondent HUF. The disputed remuneration was treated as D. C. Shah's individual income rather than HUF income (SCR p.591; PDF p.6).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: for a karta's remuneration, build an evidence matrix separating family capital, the route into the firm, contractual management duties, personal qualifications, services actually compensated, treatment of other partners and the payment's relationship to profit share. The decisive inquiry is the real and sufficient nexus with family assets, not merely the coexistence of HUF investment and remuneration. Re-test that analysis under the governing current statute before reliance (based on SCR pp.589-591; PDF pp.4-6).
Source: Primary judgment: reviewPoint
Source & verification
Download original judgment / order · Open cited source rendition
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Statutory scope
The Court applied historical HUF-income doctrine in assessments under the Indian Income-tax Act, 1922 for 1959-60 and 1960-61. The report does not identify or construe a specific later statutory provision governing partner remuneration. No current-law, later-treatment or statutory-equivalence clearance was undertaken.
Later treatment
Source checked 2026-10-11. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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