1993 (7) TMI 47 - HC - Income Tax

Clubbing Of Income Of Spouse, Concern, Professional, Salary Paid By Assessee To Spouse, Technical

Summary

Issues Involved:
1. Applicability of section 64(1)(ii) to professional concerns.
2. Interpretation of "substantial interest" in proprietary concerns.
3. Interpretation of "technical or professional qualifications" and the proviso to section 64(1)(ii).

Summary:

1. Applicability of Section 64(1)(ii) to Professional Concerns:
The assessee contended that the term "concern" in section 64(1)(ii) did not include "profession" and thus the provisions were inapplicable. The Tribunal rejected this, stating that "concern" means both business and professional concerns. The High Court upheld this interpretation, stating that the term "concern" is of wide import and includes any entity carrying on business or professional activity, whether owned by a company, partnership, or individual.

2. Interpretation of "Substantial Interest" in Proprietary Concerns:
The assessee argued that section 64(1)(ii) does not apply to proprietary concerns where the individual has 100% interest. The Tribunal and the High Court rejected this argument, clarifying that "substantial interest" includes having cent per cent interest. The Explanation 2(ii) is a deeming provision to extend the section's application and does not restrict it.

3. Interpretation of "Technical or Professional Qualifications" and the Proviso to Section 64(1)(ii):
The assessee contended that "technical or professional qualifications" should include necessary knowledge and experience, and that the word "and" in the proviso should be read as "or." The Tribunal and the High Court disagreed, emphasizing that both conditions in the proviso must be satisfied: the spouse must possess technical or professional qualifications, and the income must be solely attributable to the application of such knowledge and experience. The High Court clarified that "qualification" must be specific to the technical or professional work and cannot be interpreted broadly to include general knowledge or experience.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the income of the assessee's wife was includible in the assessee's income u/s 64(1)(ii) as she did not possess any technical or professional qualifications. The question was answered in the affirmative, in favor of the Revenue and against the assessee.