1979 (2) TMI 131 - AT - Income Tax

Summary

Issues:
Departmental appeal regarding the denial of standard deductions under s. 16(i) for the assessment years 1975-76 and 1976-77.

Analysis:

The judgment by the Appellate Tribunal ITAT Gauhati consolidated two Departmental appeals concerning the denial of standard deductions under s. 16(i) for the assessment years 1975-76 and 1976-77 for the same assessee, who is a practicing advocate. The assessee declared salary income and claimed standard deductions, which were rejected by the Income Tax Officer without providing reasons. Upon appeal, the AAC held that once income is assessed under the head 'salary,' standard deductions should be granted as per the law. The Departmental Representative argued that the income was received for legal negotiation and settlement services, not as salary, thus standard deductions should not apply.

The assessee argued that since the income was assessed under the head 'salary,' the Department cannot deny standard deductions now. Alternatively, if the income is considered professional income, necessary expenditures should be allowed. The assessee highlighted the expenses incurred during negotiations, stating that the claimed deductions were conservative. The Tribunal noted that a practicing advocate cannot be a salaried employee simultaneously. It found that changing the head of income at this stage would require allowing all admissible deductions under s. 37(1), which would exceed the standard deductions claimed. Therefore, the AAC's decision was upheld, and the Departmental appeals were dismissed.

In conclusion, the Tribunal dismissed both appeals, emphasizing that the Department's attempt to change the head of income after assessment was problematic. It was held that the assessee, being a practicing advocate, should be entitled to deductions under s. 37(1) if the income was considered professional, which would exceed the standard deductions claimed. The Tribunal found no merit in the Department's case and upheld the AAC's decision, stating that the assessee should be allowed all admissible deductions under the law.