C.M. Lodha, J.
1. The question of law referred to us by the Income-tax Appellate Tribunal, Bombay Bench 'B', under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as 'the Act') is:
'Whether, on the facts and in the circumstances of the case, the remuneration received by Shri Hiralal Maganlal Parikh from the Associated Stone Industries (Kotah) Ltd. for all the three years and from the Rajputana Mining Agencies Pvt. Ltd. for the last year was includible in the income of the Hindu undivided family of which he was the karta ?'
2. The assessee is a Hindu undivided family whose manager was Shri Hiralal Maganlal, who is now reported to be dead. The assessment years with which we are concerned are 1959-60 (ending on March 31, 1959), 1960-61 (ending on March 31, 1960) and 1961-62 (ending on March 31, 1961). The family held 50,000 ordinary shares out of 2.00,000 shares in a company called Rajputana Mining Agencies Pvt. Ltd. (which will hereinafter be referred to as 'the agency company'), During the year ending on March 31, 1961, 1,000 shares were transferred to Shri Hiralal M. Parikh. Similarly, the family held 9,053 shares in another company known as Associated Stone Industries (Kotah) Ltd. (to be hereinafter referred to as 'the A.S.I.'). The total issued shares of this company were 1,85,000. During the year ending on March 31, 1961, the assessee-family came to hold 2,640 ordinary shares as a result of partial partition among some of its members. Shri Hiralal also held in his individual capacity 2,353 shares during that year. He was a director of the agency company and was also an ex-officio director of the A.S.I. It may be relevant to state here that, under Article 95 of the articles of association of the agency company, the qualification of a director is that he must hold at least one share in the company, which may be registered in his name solely or jointly with another person or persons. So also, under Article 102 of the articles of association of the A. S. I., the managing agents shall be entitled to nominate the directors not exceeding, subject to the provisions of Section 377 of the Companies Act, two directors who shall be known as ex-officio directors and such ex-officio directors will not be required to hold any qualification, shares. In this connection it may further be observed that the agency company were the managing agents of the A.S.I.
3. In order to appreciate the point for determination, it would be proper to refer to the following articles of the articles of association of the A.S.I.:
'110. Remuneration of directors.--The remuneration of a director shall be such amount not exceeding Rs. 100, as the directors may from time to time fix, for every meeting of the board attended by him.
112. Special remuneration of directors.--If any director shall be called upon to go or reside out of his usual place of residence on the company's business, or otherwise perform extra services (which expression shall include the work done by a director in signing certificates of shares or debentures issued by the company, or work done by him as a member of any committee appointed by the directors in terms of these articles) the directors may arrange with such director for such special remuneration for such services, either by way of salary, or commission or by a percentage of profits or the payment of a fixed sum of money, as may be determined by the directors, and such remuneration may be either in addition to or in substitution of his remuneration above provided. The directors shall also be entitled to be paid any travelling or other expenses incurred in connection with the business of the company.
123. General management of the company.--The general management of the business of the company shall be in the hands of managing agents of the company, who shall have power and authority on behalf of the company to make all purchases and sales and enter into all contracts and to do all other acts and things as are usual, necessary or desirable for the management of affairs of the company or are in their opinion essential, incidental or conducive to the attainment of all or any of the objects of the company.
125. Managing agents to do general work.--Notwithstanding anything contained in these articles, the managing agents are expressly allowed generally to work for and contract with the company and also to do any other work for the company upon such terms and conditions and for such remuneration as may from time to time be agreed upon between them and the directors of the company.'
4. On October 28, 1948, a resolution was passed by the board of directors of the A.S.I. that Shri Hiralal M. Parikh, one of the directors of the company, who is called upon to perform extra duties is entitled to special remuneration for the services rendered by him as provided under Article 115 (which now corresponds to Article 112). It was further resolved that looking to the efforts made and hard work put in by Mr. Hiralal since the incorporation of the company, he may be paid a sum of Rs. 15,000 as a special remuneration out of the funds of the company up to September 30, 1947, and from October 1, 1947, he may be paid a sum of Rs. 700 as special remuneration for rendering extra services. This remuneration was increased to Rs. 1,000 per month under a subsequent resolution dated December 15, 1949. On December 15, 1951, the company resolved that Shri Hiralal's allowance be increased from Rs. 1,000 to Rs. 1,500 per month with effect from October 1, 1951 (vide annexure 'B').
5. The Government of India, Ministry of Finance, however, by a letter dated January 9, 1953 (annexure 'D'). asked the A.S.I, to furnish reasons for the appointment of a member of the agency company as a director to supervise the day-to-day work of the company on a monthly remuneration and also particulars in detail of the nature of work done by Shri H. M. Parikh. In reply to this letter the company by its letter dated March 2, 1953 (annexure 'E') said that in view of the fact that Shri Parikh was devoting his whole time to the affairs of the company and thus had to shoulder the additional burden, he should be given a salary of Rs. 1,500 per month from October 1, 1951, Regarding the nature of work it was stated that Shri Parikh had to attend to all the day-to-day work of the company and had also to exercise supervision over the branch offices of the company at Jaipur and Bombay. It was further stated that in fact Shri Parikh attended to everything that had got to be done by the company, subject of course to the supervision of the managing agents and the board of directors of the company. The Government of India, Ministry of Finance, however, by their letter dated April 8, 1953 (annexure 'F'), did not accept the proposal of the A.S.I. in regard to payment of an additional remuneration of Rs. 500 per month to Shri Hiralal.
6. A few years later in the course of correspondence between the A.S.I. and the Government of India regarding approval of the Government for reappointment of the managing agents under Section 326 of the Companies Act, 1956, the Government of India, Ministry of Commerce and Industries, Department of the Company Law Administration observed in their letter dated March 18, 1960 (annexure 'G'), that the Government would be prepared to approve the reappointment of the agency company as the managing agents for a further period not exceeding 5 years on the usual scale of remuneration subject to a minimum of Rs. 20,000 on the terms and conditions laid down in the letter, one of which was that the remuneration of Rs. 1,000 per month being paid or payable to the director-in-charge of the managing company for acting as a whole-time director of the company should be within the remuneration payable to the managing agents. Thereafter, on July 25, 1960, the agency company passed a resolution voting a salary of Rs. 1,500 per month to Shri Hiralal M. Parikh as the managing director of the company linger Article 99 of the articles of association of the agency company.
7. During the assessment years 1959-60 and 1960-61, Shri Hiralal received Rs. 24,000 as remuneration from the A.S.I. and during the year 1961-62 Rs. 4,484 were paid as remuneration from the A.S.I, and Rs. 11,326 were paid by the agency company.
8. The remuneration received by Shri Parikh for all the years prior to the assessment year 1959-60 were assessed as his individual income, However, for the assessment years 1959-60, 1960-61 and 1961-62, the Income-tax Officer concerned assessed this income in the hands of M/s. Hiralal and Parikh, Ramganj Mandi (Hindu undivided family). He was of the opinion that the remuneration received by Shri Parikh was as a result of the major portion of shares held by the Hindu undivided family in the agency company as well as in the A.S.I. In coming to this conclusion the Income-tax Officer relied upon Commissioner of Income-tax v. Kalu Babu Lal Chand,  37 I.T.R. 123 ; [I960] 1 S.C.R. 320 (S.C.) and Sri Mohan Tayal v. Commissioner of Income-tax,  46 I.T.R. 1230 (Punj.). The view taken by the Income-tax Officer was upheld by the Appellate Assistant Commissioner. Aggrieved by the decision of the Appellate Assistant Commissioner the assessee took up the matter in appeal before the Income-tax Appellate Tribunal which too dismissed the assessee's appeal with the following observations :
'In order to appreciate the nature of the service rendered we have to turn to the letter dated March 2, 1953, sent by the assessee's chartered accountants to the Government of India, about which we have mentioned already. Taking this letter along with the letter of the Government of India, dated March 18, 1960, it is clear that Shri H.M. Parikh was attending only to the ordinary day-to-day affairs of the company, which the managing agents are bound to do. It has not been shown that he rendered any specific service which is referable to his personal qualification. In the absence of such evidence, we have to hold that the remuneration paid to him is traceable only to the holding of the family. In view of the fact that he is only an ex-officio director in the Associated Stone Industries (Kotah) Ltd., it is not necessary to look to the family's holding in that company. In the managing agency company the family holds 1/4th interest. Only in the year ended March 31, 1961, 1,000 shares have been transferred from the family's holdings to the individual, Shri Hiralal M. Parikh. However, there is nothing to show that the appointment of Shri Parikh as a director at least in that year was traceable to any service needing his personal qualifications. As his appointment in Associated Stone Industries (Kotah) Ltd., the managed company, as a director is traceable only to the interest of the family in the managing agency firm, the remuneration is directly traceable to the family holdings and is as such liable to be assessed in the hands of the family. We have, therefore, to agree with the assessments of the remuneration in the hands of the assessee-family as part of the assessable income for the years under consideration.'
9. The question of law arising for decision in this case has been the subject-matter of numerous decisions of the Supreme Court and of various High Courts. The learned counsel for the assessee has vehemently urged before us that Kalu Babu Lal Chand's case has been considered in a number of later decisions of the Supreme Court in which it has been observed that the principle laid down in Kalu Babu Lal Chand's case is no more valid. In support of his contention the learned counsel has relied on Palaniappa Chettiar v. Income-tax Commissioner,  68 I.T.R. 221;  2 S C.R. 55 (S.C.) Commissioner of Income-tax v. Gurunath V. Dhakappa,  72 I.T.R. 192 (S.C.) Commissioner of Income-tax v. D.C. Shah,  73 I.T.R. 692 ;  3 S.C.R. 586(S.C.) Raj Kumar Singh Hukam Chandji v. Commissioner of Income-tax,  78 I.T.R. 33;  1 S.C.R. 748 (S.C.) Prem Nath v. Commissioner of Income-tax,  78 I.T.R. 319 (S.C.) V.C. Rajarathnam v. Commissioner of Income-tax,  80 I.T.R. 705 (Mys.) and Commissioner of Income-tax v. B.N. Bhaskar,  82 I.T.R. 345 (Delhi). On the other hand it has been urged on behalf of the revenue that the Tribunal has come to a clear finding that Shri H. M. Parikh was attending only to the ordinary day-to-day affairs of the A.S.I. which the managing agents, namely, the agency company, were bound to do and that it has not been shown that Shri Parikh had rendered any specific service which is referable to his personal qualification. In these circumstances it is urged that Shri Parikh's appointment in the A.S.I. as a director has rightly been held by the Tribunal to be traceable only to the interest of the family in the managing agency and the answer to the question must be made in the affirmative. In support of his contention learned counsel for the revenue has relied upon Mathura Prasad v. Commissioner of Income-tax,  60 I.T.R. 428 (S.C.).
10. In Mathura Prasad v. Commissioner of Income-tax, the facts were that a Hindu undivided family owned considerable property and carried on different businesses. A partition of the properties and the businesses was made among the six branches and as a result of that partition the 6th share was allotted in the assets partitioned to the smaller Hindu undivided family of which Mathura Prasad was the manager. After partition the managers of the six branches entered into an agreement of partnership to carry on the businesses. Under the agreement, M, who was to manage the affairs of one of the businesses, was entitled to a monthly allowance of Rs. 1,500, such allowance not exceeding the profits disclosed at that office. It was conceded before the Tribunal that M had entered into partnership as representing his smaller Hindu undivided family for the benefit of the family. The Tribunal further found that M became a partner with the help of joint family funds and that the allowance received by him was directly related to the investment of the family funds in the partnership business and accordingly his allowance was. taxed as income of the smaller Hindu undivided family in its hands. The Supreme Court observed that by the terms of the partnership agreement, though a monthly allowance of Rs. 1,500 was named as the amount which Mathura Prasad was entitled to withdraw, the amount was liable to be reduced, if the profits earned did not justify the withdrawals and Mathura Prasad was bound to refund the excess of the withdrawals over the appropriate share in the profits. Therefore, by the agreement, it was intended that, subject to a maximum of Rs. 1,500 per month, Mathura Prasad was entitled to make withdrawals commensurate with the profits of the firm. It was further observed that in the light of the principle laid down by this court in Kalu Babu Lal Chand's case it must be held that on the finding recorded by the Tribunal the question was concluded by the judgment of this court and any further elaboration would have been academic. In our opinion, the facts of Mathura Prasad's case a are distinguishable inasmuch as in that case the monthly allowance of Rs. 1,500 was liable to be reduced if the profits earned did not justify the withdrawals. It was also held in that case, that the right to draw the allowance was made possible by the use of the family funds.
11. In Rajkumar Singh Hukam Chandji's case all the previous judgments of the Supreme Court bearing on the point including Mathura Prasad's case have been discussed, and their Lordships were pleased to observe:
'At first sight there appears to be conflict between the two lines of decisions, namely, Kalu Babu's case, Mathura Prasad's case, the two Dhanwatey's cases (V.D. Dhanwatey,  68 I.T.R. 365 ;  2 S.C.R. 62 (S.C.) and M.D. Dhanwatey,  68 I.T.R. 385 (S.C.)) and Krishna Iyer's case,  73 I.T.R. 539;  1 S.C.R. 943 (S.C.) and Palaniappa Chettiar's case, Dhakappa's case and D.C. Shah's case on the other. The line that demarcates these two lines of decisions is not very distinct, but on a closer examination that line can be located. In order to find out whether a given income is that of the person to whom it was purported to have been given or that of his family, several tests have been enumerated in the aforementioned decisions but none of them excepting Kalu Babu's case makes reference to the observations of Lord Sumner in Gokul Chand's case, A.I.R. 1921 P.C. 35 that 'in considering whether gains are partible, there is no valid distinction between the direct use of the joint family funds and a use which qualifies the member to make the gains by his own efforts.' We think that that principle is no more valid. The other tests enumerated are :
'(1) Whether the income received by a coparcener of a Hindu undivided family as remuneration had any real connection with the investment of the joint family funds ?
(2) Whether the income received was directly related to any utilization of family assets ?
(3) Whether the family had suffered any detriment in the process of realization of the income and
(4) Whether the income was received with the aid and assistance of the family funds ?'
In our opinion from these subsidiary principles, the broader principle that emerges is whether the remuneration received by the coparcener in substance though not in form was but 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 a compensation made for the services rendered by the individual coparcener. If it is the former, it is an income of the Hindu undivided family, but if it is the latter then it is the income of the individual coparcener. If the income was essentially earned as a result of the funds invested the fact that a coparcener has rendered some service would not change the character of the receipt. But if on the other hand it is essentially a remuneration for the services rendered by a coparcener, the circumstance that his services were availed of because of the reason that he was a member of the family which had invested funds in that business or that he had obtained the qualification shares from out of the family funds would not make the receipt, the income of the Hindu undivided family.' (The underlining is ours)
12. In view of the aforesaid observations of their Lordships it is hardly necessary to analyse the various authorities relied upon by the learned counsel for the assessee and all that we have to see is as to what inference should be drawn by applying the tests enumerated above to the facts and circumstances of the present case. It may be pertinent to point out that Shri Hiralal was devoting his whole time to the affairs of the A.S.I. It further appears that he was attending to all the day-to-day work and was in-charge of the sales of the company and was also exercising supervision over the branch offices of the company. He was also holding his individual shares in the A.S.I. In these circumstances, it would not be correct to say that the remuneration received by Shri Hiralal was, in substance, one of the modes of return made to the family because of the investment of the family funds in the business. On the other hand the correct conclusion would be that it was a compensation made for the services rendered by Shri Hiralal.
13. Learned counsel for the revenue has made much capital out of the observation made by the Government of India in their letter dated March 12, 1960 (annexure 'G'), to the following effect:
'The remuneration of Rs. 1,000 per month being paid or payable to the director-in-charge of your managing agency company for acting as the whole-time director of your company should be met out of the remuneration payable to the managing agents ; when the company has a managing agent, the Central Government see no justification for the appointment of a whole-time director to be remunerated separately by the company.'
14. This passage only means that the remuneration of the director-in-charge of the managing agency company shall not be paid by A.S.I, This, however, does not change the nature of the remuneration paid to Shri Hiralal on account of services rendered by him. As observed by their Lordships in Raj Kumar Singh Hukam Chandji's case if the income was essentially earned as remuneration for the services rendered by a coparcener, the circumstance that his services were availed of because of the reason that he was a member of the family which had invested the funds in that business or that he had obtained the qualification shares from out of the family funds would not make the receipts the income of the Hindu undivided family. We may point out here that in order that a remuneration for the services rendered by a coparcener may be considered as his individual income it is not necessary that the coparcener must possess any particular technical qualification. So far as the amount of Rs. 11,326 paid by the agency company to Shri Hiralal in the year 1961-62 is concerned, it may be noticed that Shri Hiralal had been made the managing director by the agency company by its resolution dated July 25, 1960.. He did not become the managing director of the company for the mere reason that his family had purchased considerable shares in the firm. He was appointed as a managing director by the board of directors and he received the salary for his personal services. There is no material on the record to hold that he was elected managing director on behalf of the family. In the past the remuneration received by him was assessed as his individual income. It appears to us that the directorship of Shri Hiralal was an employment of personal responsibility and ability. In these circumstances we find it difficult to agree with the conclusion reached by the Tribunal that the income in question must be treated as a part of the assessable income of the assessee-family.
15. On the facts and in the circumstances of the case, we are of opinion that the remuneration received by Shri Hiralal Maganlal Parikh from the Associated Stone Industries (Kotah) Pvt. Ltd. for all the three years and from the Rajputana Agency Private Ltd. for the last year was not includible in the income of the Hindu undivided family of which he was the karta.
16. The question is answered in the negative. In the circumstances of the case, the parties' are left to bear their own costs.