1991 (4) TMI 217 - AT - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the CIT under Section 263 of the Income-tax Act, 1961.
2. Applicability of Section 64(1)(ii) of the Income-tax Act, 1961.
3. Definition and interpretation of "technical or professional qualification" under Section 64(1)(ii).

Issue-wise Detailed Analysis:

1. Jurisdiction of the CIT under Section 263 of the Income-tax Act, 1961:

The CIT invoked Section 263 of the Income-tax Act, 1961, to revise the original assessments made by the assessing officer. The CIT deemed the original assessments erroneous and prejudicial to the interest of revenue because the assessing officer did not include the remuneration and commission received by Shri Gunwant J. Shah in the income of the assessee, as mandated by Section 64(1)(ii). The Tribunal, however, held that the CIT was not justified in invoking Section 263, as the original assessments were not erroneous and prejudicial to the interest of revenue. The Tribunal emphasized that the spouse of the assessee possessed the requisite professional and technical qualifications, and the salary and commission paid were solely attributable to his technical or professional knowledge and experience.

2. Applicability of Section 64(1)(ii) of the Income-tax Act, 1961:

The CIT included the remuneration and commission received by Shri Gunwant J. Shah in the income of the assessee under Section 64(1)(ii), arguing that he did not possess any technical or professional qualification related to the manufacture of chemicals required in the textile industry. The Tribunal disagreed, stating that the spouse of the assessee had a B.Com. degree and significant experience, which qualified as professional knowledge and experience. The Tribunal relied on the harmonious construction of the proviso to Section 64(1)(ii) provided by various High Courts, which emphasized that technical or professional qualifications did not necessarily require formal certification but could include expertise gained through experience.

3. Definition and interpretation of "technical or professional qualification" under Section 64(1)(ii):

The Tribunal examined various judgments to interpret "technical or professional qualification." The Karnataka High Court in CIT v. D. Rajagopal adopted a strict interpretation, requiring formal qualifications. However, the Andhra Pradesh High Court in Batta Kalyani and the Kerala High Court in Sorabji Dorabji provided a broader interpretation, considering expertise gained through experience as sufficient. The Tribunal preferred the broader interpretation, aligning with the majority view, and concluded that the spouse of the assessee possessed the requisite qualifications. The Tribunal also referred to the Special Bench decision in Dr. J.N. Mokashi, which emphasized that any occupation requiring intellectual or manual skill controlled by intellectual skill could be considered a profession.

Conclusion:

The Tribunal concluded that the spouse of the assessee possessed the requisite technical or professional qualifications, and the salary and commission paid to him were attributable to his professional knowledge and experience. Therefore, the CIT was not justified in invoking Section 263 to revise the original assessments. The Tribunal set aside the revisional orders of the CIT and restored the original assessments made by the assessing officer. The appeals were allowed.