1999 (8) TMI 28 - HC - Income Tax

Summary

Issues:
1. Interpretation of the Portuguese Civil Code regarding the apportionment of income between spouses.
2. Assessment of income from profession and salary earned by an individual in the context of communal property.
3. Application of Section 5A of the Income Tax Act, 1961 to determine the apportionment of income between spouses governed by the Portuguese Civil Code.

Analysis:
1. The case involved a practising doctor who was also a partner in a clinic, declaring 50% of income from various sources in the individual return based on the Portuguese Civil Code. The Assessing Officer (AO) assessed income from salary and profession in the individual's hands, rejecting the claim that it should be assessed in a 50:50 ratio between spouses. The Commissioner of Income Tax (Appeals) accepted the claim due to the Portuguese Civil Code governing communal property. The Tribunal upheld the decision, leading to the reference to the High Court.

2. The controversy was resolved by the amendment of the Income Tax Act, 1961, through the Finance Act, 1994, with the insertion of Section 5A. This section mandates the equal apportionment of income between spouses governed by the Portuguese Civil Code, except for salary earned by a specific spouse. Income from profession is also to be apportioned equally. However, the Tribunal's statement lacked clarity on whether the income in question was from profession or salary, prompting a remittance to the Tribunal for a fresh decision in line with Section 5A.

3. The High Court disposed of the reference without costs, directing the Tribunal to reexamine the matter considering the provisions of Section 5A for the proper apportionment of income between spouses. This judgment clarifies the application of the Portuguese Civil Code and Section 5A of the Income Tax Act, 1961 in determining the assessment of income earned by individuals in the context of communal property governed by specific legal frameworks.