1. This is a case stated under Section 66(1) of the Income-tax Act 1922 (hereinafter referred to as the Act). The question referred is:
'Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 21,600 received by Sri Rameshwar Prasad Bagla as Managing Director's remuneration from the Indian Textile Syndicate Ltd., was rightly included as income of the H. U. F. of which Sri Rameshwar Prasad Bagla was the Karta?'
2. The relevant assessment year is 1953-54, the previous year being Sambat year ending Asauj Sudi 9, 2009, corresponding to September-October 1952 of the English calendar. The assessment for the relevant assessment year was made on Sri Rameshwar Prasad Bagla in the status of a Hindu Undivided family including the share of profit from the firm of Gajadhar Prasad Barjnath. The latter firm was a firm of the three Bagla brothers. Each of the three Bagla brothers was representing his smaller Hindu undivided family, they being respective Kartas of their families. The said firm was registered. The firm of the three brothers acquired a controlling interest in a public limited Company known as Indian Textile Syndicate Ltd. The dividend income therefrom was divided between the three Bagla brothers, and, ultimately, their shares were credited to their respective families and assessed in the hands of each of these in the status of a Hindu undivided family. Sri Rameshwar Prasad Bagla was appointed the Managing Director of the said Company. A remuneration of Rs. 21,600 was received by him as a Director It was claimed that the sum was the personal income of Rameshwar Prasad Bagla and therefore should be excluded from the assessment of the Hindu undivided family. The Income-tax officer for the reasons given by him in the assessment order for the immediately preceding assessment year 1952-1953, included in the said sum in the assessment of the assessee Hindu undivided family. The assessee had claimed, vide, his letter dated 18-8-1952, sent along with the return, that the Managing Director's allowance was the personal income of Sri Rameshwar Prasad Bagla, and, therefore, it had not been returned in the return of the assessee family. The Income-tax officer held that as Rameshwar Prasad was appointed as Managing Director not because of any personal qualification but because the majority of the shares and the controlling interest in Messrs. Indian Textile Syndicate Ltd. was held by M/s. Gangadhar Baijnath whereof the assessee family was a partner, the Managing Director's allowance was therefore the income of the assessee family and not that of Sri R. P. Bagla in his individual capacity.
3. Against the assessment for 1952-53, an appeal was taken to the Appellate Assistant Commissioner who allowed the appeal for the reason that Sri R. P. Bagla could not be said to have been appointed a Managing Director in his representative capacity on behalf of the Hindu undivided family for the controlling interest in the Indian Textile Syndicate Ltd. was that of the firm of the three brothers. M/s. Gangadhar Baijnath and not of the assessee family. He, therefore, directed the sum of Rs. 18,000 which was the remuneration in that year, to be deleted from the assessment of the assessee Hindu undivided family. No appeal against that order was filed by the department before the Tribunal.
4. Against the order of the Income-tax officer for the relevant assessment year 1953-54, the assessee went up in appeal to the Appellate Assistant Commissioner, who following his decision given in respect of the immediately preceding assessment year again directed the deletion of the remuneration to the Managing Director which was in this year a sum of Rs. 21,600. Against that order the Department took an appeal to the Income-tax Appellate Tribunal. By that time the decision in Commr. of Income-tax. West Bengal v. Kalu Babu Lal Chand, : 37ITR123(SC) came to be delivered by the Supreme Court and the only question before the Tribunal that was attempted to be canvassed was that the present case was distinguishable from Kalu Babu Lal Chand's case : 37ITR123(SC) . The Tribunal dealt with the points of distinction and held that they were distinctions without any substance. It was further found by the Tribunal, 'There is no doubt that in the present case also the assessee was enabled to acquire the post of Managing Director only by the aid of the family funds. The firm of M/s. Gangadhar Baijnath which has the controlling interest in the company is a partnership of the three Bagla brothers representing the three Hindu undivided families. In other words the controlling interest in the company was acquired only with the family funds of these three brothers and mainly, if not solely because of this controlling interest, the assessee was enabled to become the Managing Director. Accordingly, the Department's appeal was allowed and the sum of Rs. 21,600 was held to have been rightly included by the Income-tax officer in the assessment of the family. Hence, this reference at the instance of the assessee.
5. Before us also the main attempt of Mr. Mehrotra has been to distinguish the Supreme Court decision in Kalu Babulal Chand's case : 37ITR123(SC) . The facts of two cases can ever be the same as pointed out by the Supreme Court in Abdul Kayoom v. Commr. of Income-tax : 44ITR689(SC) 'similarly is not enough because even a single significant detail may alter the entire aspect'. Further, in deciding such cases we should avoid the temptation to decide the case as said by Cordoza in the Nature of Judicial Process by matching the colour of one case against the colour of another. Nevertheless, what is important when considering a Supreme Court decision which is binding under the Constitution as the law of the land is the ratio decidendi thereof and whether that is applicable to the facts of the particular case. If the ratio applies then it will not be right for any Court to draw fine distinctions between the case in hand and the facts of the Supreme Court case. Even an obiter of the Supreme Court has to be given the utmost weight.
6. The ratio of the Supreme Court decision in B. Kalu Babu Lal Chand's case : 37ITR123(SC) was this, that where any acquisition has been made by the use of family funds, directly or indirectly the income therefrom is that of the family and not of the individual member thereof and it has to be assessed in the hands of the family. In the said Supreme Court case, one Rohatgi, Manager of a Hindu undivided family had taken over a business as a going concern and promoted a company which took over the business The Articles of Association of the Company provided that Rohatgi would be the first Managing Director on a remuneration specified in the Articles The shares which stood in the name of Rohatgi were acquired with funds belonging to the joint family and the family was in enjoyment of the dividend paid on those shares. It was claimed that the Managing Director's remuneration was the personal earning of Rohatgi and could not be added to the income of the Hindu undivided family. The Supreme Court negatived the contention and held that the Managing Director's remuneration received by Rohatgi was as between him and the Hindu undivided family, the income of the family and should be assessed in its hands. In reaching that conclusion the court observed, 'a Hindu undivided family cannot enter into a contract of partnership with another person or persons. The Karta of the Hindu undivided family cannot enter into a contract of partnership with another person or persons. The Karta of the Hindu undivided family, however, may and frequently does enter into partnership with outsiders on behalf and for the benefit of his joint family. But when he does so, the other members of the family do not vis-a-vis the outsiders become partners in the firm They cannot interfere in the management of the firm or claim any account of the partnership business or exercise any of the rights of a partner So far as outsiders are concerned it is the Karta who alone is and is in law recognised, as the partner. Whether in entering into a partnership with outsiders, the Karta acted in his individual capacity and for his own benefit or he did so as representing his joint family and for its benefit is a question of fact If for the purpose of contribution of his share of the capital in the firm the Karta brought in monies out of the till of the Hindu undivided family, then he must be regarded as having entered into the partnership for the benefit of the Hindu undivided family and as between him and the other members of his family he would be accountable for all profits received by him as his share out of the partnership profits and as such profits would be assessable as income in the hands of the Hindu undivided family.'
7. In Kalu Babu Lal Chand's case, : 37ITR123(SC) the Supreme Court specifically approved the decision of the Bombay High Court In re Haridas Purshottam, : 15ITR124(Bom) . The facts of that case are almost akin to the facts of the present case and they may therefore be set out. There were three brothers, one of whom was Haridas Purshottam and they were separate, but each of them was joint with his own sons. The three brothers formed a partnership and it was admitted that Mr. Haridas Purshottam held his shares as Karta. In the year 1918, the three brothers and five other persons purchased Hubli Mills in partnership. There is no deed of this partnership but again there was no doubt and it was not disputed that Mr. Haridas Purshottam held his share in this partnership as Karta of the Joint family In the year 1920, the three brothers and five other persons promoted a company. The Bharat Spinning and Weaving Co. Ltd. to take over the Hubli Mills, and on the 8th of March 1920, the mill was in fact taken over ...... the three brothers received by way of consideration Rs. 1,000 in the new Company' It was held, that as the Managing Agency was derived from or acquired with the assistance of the joint family property i.e. the mills in which the assessee as Karta was beneficially interested, the income from the managing agency received by the assessee must be treated as income of the family of which he was the Karta This case would clearly demolish the fine distinction that the learned counsel for the assessee tried to draw between Kalu Babu Lal Chand's case, : 37ITR123(SC) and the present one, on the ground that in the former there was no partnership as such but the Hindu undivided family itself was one of the promoters of the Company to take over the business as a going concern Haridas Purshottam's case, : 15ITR124(Bom) shows, that the mere inter position of a partnership between the Hindu undivided family and the Company would not in itself make a vital difference, if ultimately, the funds invested in the company are traceable through the partnership firm to the three respective Hindu undivided families of the three Bagla brothers. The control that Gangadhar Baijnath obtained over the company was only the result of the funds received by the three brothers from their respective families In any event, when the dividend Income from the Company was admittedly being returned and assessed in the hands of the respective Hindu undivided families there was every justification for the Tribunal to come to the finding of fact that Sri Rameshwar Prasad Bagla received payments as Managing Director for and on behalf of the family. In the absence of any evidence to the contrary on the record his appointment and remuneration was prima facie due to the fact of his being the Karta of his family, which in its turn had enabled him to become a partner in the firm of M/s. Ganga Dhar Baijnath, representing his family.
8. It may further be noticed that in Kalu Babu Lal Chand's case, : 37ITR123(SC) the Supreme Court was at pains to point out that the Madras High Court had overlooked the principle laid down by the Judicial Committee in Amarnath v. Hukum Chand Nathmal, 48 I A 162=AIR 1921 PC 35 where it was held that there could be no valid distinction between the direct use of the joint family funds and the use which qualified the member to make the gains on his own efforts in that case a member of the joint family entered the Indian Civil Services, no doubt by reason of his intelligence and other attainments, he had entered into a personal agreement with the Secretary of State in Council, and he received his salary for rendering his personal service, but, as all that was made possible by the use of the joint family funds which had enabled him to acquire the necessary qualification, his earnings were held to be a part of the joint family property.
9. In the present case, the best that can be said for the assessee is that the family funds were not used directly but indirectly through the firm of the three Bagla Brothers M/s. Gangadhar Baijnath. But on the view expressed by the Judicial Committee which was approved by the Supreme Court, the indirect use of family funds will not make any difference, and the remuneration of the Karta as Managing Director would fall to be included in the hands of the assessee family.
10. Reliance was placed by the learned counsel for the assessee on the decision of the Supreme Court in Piyare Lal Adishwar Lal v. Commr. of Income-tax Delhi : (1966)IILLJ759SC . No advantage however can be derived by the assessee therefrom in view of it having been explained by the Supreme Court itself in Mathura Prasad v. Commr. of Income-tax : 60ITR428(SC) in these words:
'The decision in : (1966)IILLJ759SC on which reliance was sought to be placed, has no bearing on the question sought to be raised in this appeal. That was a case in which a member of a Hindu undivided family had furnished as security the properties of the family under the agreement whereby he was appointed treasurer of a bank. Remuneration received by the Manager of the family for working as a treasurer was claimed to be income of the Hindu undivided family, because the properties of the family were furnished as security, but this Court rejected that claim. We see no analogy between a case in which the property of the Hindu undivided family is sought to be encumbered for obtaining a benefit which is essentially personal to the manager and a case in which with the aid of the family funds the manager of the family is able to enter into a partnership and to earn allowance, which he would not otherwise have been entitled to receive.'
11. For the reasons given above we would answer the question referred in the affirmative and against the assessee. The assessee will pay the costs of this reference, which we assess at Rs. 250. Counsel's fee is also assessed at Rs. 250. The reference is answered accordingly.