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TMI Blog1979 (6) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... gnoring the amount for deduction under s. 16 (i) of the Act. 3. In the further appeal before us, the assessee has reiterated the claim while the revenue has supported the orders of the authorities below. 4. After careful consideration of the rival submission, we are of the opinion that the assessee s claim is correct and must be allowed. Sec. 16 provides that the income chargeable under the head salaries shall be computed after making a deduction which is at present called standard deduction. Sec. 17 states that salary for the purpose of ss. 15 and 16 shall include any annuity or pensions. It is, therefore, self evident that the deduction under s. 16 should be made in respect of salary which under s. 17 includes the pension and such pension cannot be excluded for the purpose of this deduction. The contention of the revenue is based on a subtle distinction between salary income earned from a current employment and pension earned form past employment. But we find no room for any such distinction because the provisions of s. 16 which were amended by Finance Act, 1974, did away with the previous requirement that any deduction under s. 16 would be dependent upon proof of actual expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch under s. 80L in respect of both his interest income of Rs. 25,726 as well as wife s interest income of Rs. 5,100. The ITO was of the opinion that as the interest income of the wife has been added under s. 64 in the total income of the assessee he was entitled to the benefit of under s.. 80L only once and not in respect of each deposit. On appeal, the AAC was of the opinion that a person who can qualify for deduction under s. 80L is only a person who is treated as assessee and since the spouse was not an assessee the deduction under s. 80L cannot be given in respect of her income. He accordingly upheld the order of the ITO. 6. In the further appeal before us, it was contended on behalf of the assessee that the provisions of s. 64 r/w s. 80 L did not warrant the view taken by the authorities below. On the other hand, the revenue supported the orders of the authorities below. 7. On a careful consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed on this point also. Under s. 64 (1)(iii) in computing the total income of any individual, there shall be included all such income as arises directly or indirectly to the spouse of such ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been transferred, the income under the head business would have been computed under s. 28 to 44 after allowing various deductions provided therein. There is no reason why such deductions cannot be allowed in computing the income from that business for the purpose of adding it under s. 64. The position is not different when it comes to the income arising to the spouse from membership in a firm or a salary in a firm which also would have earned the relevant deductions if they had arisen directly to the assessee instead of being added under s. 64 after having arisen to the spouse. When we find that income from all other categories added under s. 64 would be only the net income after allowing the deductions provided in the Act, we do not see any reason why interest income alone should be added back without any deduction under s. 80L. The intention of Parliament is apparently to add back only the taxable income and not the gross income of the spouse because even in the hands of the assessee it would have been only the net income which would have suffered tax and, therefore, it cannot be said that the assessee could attempt to avoid any tax on the gross income when it happened to ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual" in s. 64 is quite significant. Therefore, in a case where the assessee has no interest income and the interest income of the wife is added no deduction will be allowed under s. 80L since that income cannot be treated as if it were that of the husband and would thus be taxed in gross. The law recognises women s right to property and indeed even s.64 of the IT Act recognises that the income of the wife remains hers but authorises the addition of that income to the total income of the husband under certain circumstances. In these days of women s life it is hardly necessary to remember that the right to retention of the income would also include the obligation of the wife to pay the tax on that income when it is added to the total income of the husband. It is not as if the impact of the tax is only on the husband since it is the income which suffers tax not the individual in a case where the income of another person is added to the income of the assessee. In such circumstances, it is obviously discriminatory to interpret s. 64 as authorising the taxation of the gross income where it is added under s. 64 even though it would be only the net income which would suffer tax oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir compeers in America, even as it existed in 1931, which was so low that it would be inappropriate to follow the American decision especially when the wife in India, particularly if she be illiterate would ordinarily be in economic matters a tool in the hands of her husband. It is also significant that the provisions of s. 16(3) were applicable only to a male as decided by the Supreme Court in case of CIT vs. Sodra Devi and Damayanti Sahni (1957) 32 ITR 615 (SC). 12. However, when the IT Act was re-enacted in 1961, corresponding s. 64 was enlarged to include both men and women as it referred to the spouse instead of the wife. Moreover, at the time when s. 16(3) was enacted as well as at the time when the 1961 Act was enacted there was no exemption in respect of interest income. It was only in 1971 that s. 80L came into the field allowing exemption in respect of interest income. 13. Therefore, when we consider the facts of the case in 1979, we must consider whether the altered social and economic conditions of women as well as the altered impact of tax on interest income would make any difference to the constitutionality of the provisions. The argument was put forward in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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