COMMISSIONER OF INCOME-TAX, MADRAS vs R.M. CHIDAMBARAM PILLAI ETC.

The Supreme Court held that under Section 16(1)(b) of the Income Tax Act, 1922, the entire salary paid to partners in firms owning tea estates is taxable, as it is considered part of the profits derived from the business. The Court clarified that while 40% of the income from tea sales is taxable, the remaining 60% is agricultural and exempt from tax. Consequently, the salaries, which are derived from the exempted gross income, cannot be taxed in full. The appeal by the Revenue was dismissed, affirming the High Court's decision in favor of the respondents.