1981 (6) TMI 44 - AT - Income Tax

Summary

Issues Involved:
1. Clubbing of spouse's income under Section 64(1)(i) of the Income Tax Act, 1961.
2. Binding nature of High Court decisions on lower authorities.
3. Effect of Supreme Court's refusal to grant Special Leave Petition on the binding nature of High Court decisions.
4. Interpretation of Article 136 of the Constitution and Supreme Court Rules regarding Special Leave Petitions.

Issue-wise Detailed Analysis:

1. Clubbing of Spouse's Income under Section 64(1)(i) of the Income Tax Act, 1961:
The Income Tax Officer (ITO) clubbed the share income of the assessee's wife from the firm M/s. Ravi Prakash Rajesh Kumar into the assessee's individual income, relying on the decision of the Allahabad High Court in Madho Prasad vs. CIT. Section 64(1)(i) mandates that income arising directly or indirectly to the spouse of an individual from a firm in which such individual is also a partner should be clubbed with the individual's income.

2. Binding Nature of High Court Decisions on Lower Authorities:
The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, emphasizing that the Allahabad High Court's decision in Madho Prasad's case was binding on him and the ITO. The AAC rejected the assessee's contention that different views taken by the Andhra Pradesh and Gujarat High Courts should lead to a reversal of the ITO's order.

3. Effect of Supreme Court's Refusal to Grant Special Leave Petition:
The assessee argued that the Supreme Court's refusal to grant Special Leave Petition against the Andhra Pradesh High Court's decision in CIT vs. S. Sankaraiah implied that the Allahabad High Court's decision in Madho Prasad's case was overruled. The assessee contended that the refusal indicated the Supreme Court's approval of the Andhra Pradesh High Court's view, thus invalidating the Allahabad High Court's decision.

4. Interpretation of Article 136 of the Constitution and Supreme Court Rules Regarding Special Leave Petitions:
The Tribunal analyzed the scope of Article 136 and the Supreme Court Rules, particularly Order XVI. It was noted that a Special Leave Petition (SLP) is a preliminary step and not a decision on the merits of the case. The refusal to grant SLP does not equate to an adjudication on the merits. The Tribunal emphasized that the decision of an appeal and the decision on an SLP are distinct processes. The Tribunal cited various Supreme Court judgments to support this interpretation, including CIT vs. Dharmodayam Co. and Indian Chamber of Commerce vs. CIT, which highlighted that observations made in one case do not overrule another case unless expressly decided.

Conclusion:
The Tribunal concluded that the decision of the Allahabad High Court in Madho Prasad's case remains good law in the State of Uttar Pradesh until expressly overruled by the Supreme Court. The Tribunal rejected the assessee's argument that the refusal of the SLP in the Andhra Pradesh case implied an overruling of the Allahabad High Court's decision. Consequently, the Tribunal upheld the orders of the AAC, affirming the clubbing of the spouse's income with the assessee's income under Section 64(1)(i) of the Income Tax Act, 1961.

Result:
The appeals were dismissed.