1982 (2) TMI 147 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee is entitled to a separate deduction of Rs. 3,000 under section 80L for the interest income of the wife included under section 64.
2. Interpretation of "gross total income" as defined under section 80B(5) of the Income-tax Act, 1961.
3. Application of statutory deductions under Chapter VI-A in the context of income aggregation under section 64.

Issue-wise Detailed Analysis:

1. Deduction Under Section 80L for Wife's Interest Income:
The primary issue is whether the assessee can claim a separate deduction of Rs. 3,000 under section 80L for the interest income of Rs. 4,125 received by his wife from transferred funds, which was included in the assessee's total income under section 64. The Income Tax Officer (ITO) denied this claim, stating that the deduction under section 80L is to be allowed only once to the maximum extent permissible, and there is no provision for allowing separate deductions for income included under section 64. The assessee's appeal to the Appellate Assistant Commissioner (AAC) was also dismissed, with the AAC emphasizing that section 64(1)(iv) requires all income arising directly or indirectly to the wife to be included in the hands of the assessee, and section 80L allows a deduction only from the gross total income, which already includes the wife's interest income.

2. Interpretation of "Gross Total Income":
The concept of "gross total income" is pivotal in determining the applicability of deductions under section 80L. Initially, "gross total income" was defined under section 80B(5) as the total income computed in accordance with the provisions of the Act, without applying section 64 and before making any deductions under Chapter VI-A. However, this definition was amended retrospectively from 1-4-1968 to include income arising to the spouse or minor child under section 64. The Tribunal noted that the gross total income now includes the income of the assessee as well as the income from transferred assets to the wife, computed in accordance with the Act but before any deductions under Chapter VI-A.

3. Application of Statutory Deductions:
The Tribunal analyzed whether statutory deductions under Chapter VI-A, including section 80L, should be applied separately to the income of the wife before aggregating it with the assessee's income. The Tribunal concluded that the deduction under section 80L is to be allowed only once, from the gross total income, which includes the wife's interest income. The Tribunal emphasized that the deduction permissible under section 80L is only a maximum amount of Rs. 3,000 and does not allow for a separate deduction of Rs. 3,000 for the wife's income before aggregation.

Conclusion:
The Tribunal upheld the ITO's decision, concluding that the assessee is entitled to only one deduction of Rs. 3,000 under section 80L, and the inclusion of Rs. 4,125 from the wife's interest income in the assessee's total income is correct. The Tribunal clarified that the concept of real income is not violated by this interpretation, as the deduction under section 80L is a statutory deduction and does not affect the computation of real income. The appeal was dismissed, affirming that the deduction under section 80L is to be allowed only once, from the gross total income, which includes the wife's interest income.