1971 (8) TMI 70 - HC - Income Tax

Whether assessee was entitled to the rebate contemplated u/s 87(1)(a) in respect of the sum being the insurance premium on the policy of the life of the assessee s husband paid not by the assessee but by the assessee s husband - in the context of section 87(1)(a), the words the assessee can only mean the person who is bound to file the return of the income and who is actually assessed to tax by the Income-tax Officer, namely, the wife, here question is answered in negative

Summary

Issues:
Interpretation of section 87(1)(a) of the Income-tax Act, 1961 regarding entitlement to rebate on insurance premium paid by the husband for the policy on his own life. Application of section 64(1) in computing total income of an individual where the spouse is a partner in the same business firm.

Analysis:

The judgment pertains to a reference made under section 256(1) of the Income-tax Act, 1961, concerning the entitlement of an assessee to a rebate under section 87(1)(a) for an insurance premium paid by the husband. The case involved the wife of a partner in a firm who sought a rebate for the insurance premium paid by her husband on his own life. The Income-tax Officer included the husband's income in the wife's assessment but denied the rebate claimed by the wife. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld the decision, leading to the reference before the High Court.

The core issue revolved around the interpretation of section 87(1)(a), which allowed a deduction for sums paid by the assessee to effect or maintain insurance on their own life or the life of their spouse. The court emphasized that to qualify for the rebate, the premium must have been paid by the assessee and not the spouse. The court rejected the argument that including the husband's income in the wife's assessment should entitle the husband to the rebate, as the section explicitly required the premium to be paid by the assessee.

Additionally, the court analyzed the application of section 64(1), which includes income of the spouse from a business where the individual is a partner. The contention that the premium paid by the husband should be treated as paid by the wife based on the fiction of the spouses being one entity was dismissed. The court clarified that the fiction under section 64(1) was limited to specific purposes and could not be extended to claim the rebate under section 87(1)(a).

The judgment highlighted that the term "the assessee" in section 87(1)(a) referred to the person obligated to file the income tax return and assessed by the Income-tax Officer, which, in this case, was the wife. The court concluded that the wife was not entitled to the rebate for the insurance premium paid by her husband, answering the reference in the negative. No costs were awarded in the case, and the judgment was to be communicated to the Income-tax Appellate Tribunal.

In summary, the judgment clarified the strict interpretation of the provisions of section 87(1)(a) regarding the entitlement to a rebate on insurance premiums paid by the assessee, emphasizing that the premium must be paid by the assessee themselves to qualify for the deduction. The court also distinguished the application of section 64(1) in computing the total income of an individual with a spouse who is a partner in the same business firm, emphasizing the limited scope of the legal fiction regarding income attribution between spouses.