Supreme Court of India
Commissioner Of Income-Tax, Madras
Vs.
R.M. Chidambaram Pillai Etc.
Date Of Judgment- 17/11/1976
Bench: Krishnaiyer, V.R.
Khanna, Hans Raj
Citation: 1977 AIR 489, 1977 SCR(2)111, 1977 SCC(1)431
ACT:
Income Tax Act, 1922–S. 16(1)(b)–Income Tax Rules 922–r. 24 Scope of– Assessees partners in firms owning tea estates Salary paid to partners If whole salary exigible to tax.
HEADNOTE:
Rule 24 of the Income Tax Rules, 1922 states that income derived from the sale of tea grown and manufactured by the seller shall be computed as if it were income derived from business and 40 per cent of such income shall be deemed to be income, profits and gains liable to tax.
The respondents were partners in firms which owned tea estates, the composite income of which consisted largely of agricultural and partly of nonagricultural income. In addition to their share in profits, the respondents were entitled to salaries. Rejecting the contention of the respondents that only 40% of the salaries which fell within the non-agricultural income is exigible to tax and not the whole income, the Income Tax Officer charged the whole of their salaries to tax under s. 10 of the Income Tax Act, The Appellate Asstt. Commissioner held in favour of the respondents; but on appeal the Appellate Tribunal held in favour of the Revenue. The High Court allowed the respondents’ appeal.
