1983 (4) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Whether the premia paid by the assessee's wife out of her income, included in terms of section 64(1)(iv) in the hands of the assessee, should be treated as having been paid by the assessee and the deduction in terms of section 80C allowed thereon.

Issue-wise Detailed Analysis:

1. Inclusion of Wife's Income in Assessee's Total Income:

The assessee had gifted Rs. 1,02,000 to his wife, which earned interest. The interest income, excluding interest on interest, was included in the assessee's total income under section 64(1)(iv) of the Income-tax Act. The inclusion of the wife's income under section 64(1)(iv) was not disputed.

2. Deduction under Section 80C:

The assessee claimed deduction under section 80C for life insurance premia paid on his own life and his wife's life. The Income Tax Officer (ITO) allowed deduction only for premia paid on the assessee's life, arguing that section 80C contemplates deduction only from the assessee's own income.

3. Interpretation of Section 80A and 80C:

Section 80A(1) states that deductions specified in sections 80C to 80VV should be allowed from the gross total income of the assessee. The court noted that section 80A uses the term "his gross total income," implying that the total income includes income deemed to be the assessee's under section 64(1)(iv). Therefore, the words in section 80C relating to the deduction of premia paid by the assessee out of his income chargeable to tax should align with section 80A.

4. Analysis of Section 80C(1) and (2)(a)(i):

Section 80C(2)(a) specifies that sums paid by the assessee out of his income chargeable to tax for life insurance on the life of the assessee, spouse, or child are deductible. The court held that the income of the wife, included in the gross total income of the assessee under section 64(1)(iv), should be treated as the assessee's income for the purpose of section 80C.

5. Legislative Intent and Interpretation:

The court emphasized that if Parliament intended to exclude the wife's income from the deduction under section 80C, it would have explicitly stated so. The court adopted a liberal interpretation, favoring the assessee, and noted that the intention of Parliament was to provide an incentive for savings and increase the benefit of deduction.

6. Supporting Legal Provisions and Judicial Precedents:

The court referred to definitions and provisions under sections 2(7), 2(45), 5, and 4 of the Income-tax Act, which collectively support the inclusion of the wife's income in the assessee's total income. The court also cited Supreme Court decisions and amendments to section 80B(5) to justify its interpretation.

7. Rejection of Revenue's Argument:

The court rejected the Revenue's argument that the term "his income chargeable to tax" in section 80C(2)(a) refers exclusively to the assessee's personal income. The court held that the total income of the assessee, including the wife's income under section 64(1)(iv), should be considered for deductions under section 80C.

Conclusion:

The court affirmed the Appellate Tribunal's view that the assessee is entitled to claim deduction under section 80C for the premia paid by the wife from her income included in the assessee's total income. The reference was answered in the affirmative, favoring the assessee, and the Revenue was directed to pay the assessee's costs.