Skip to content


Smt. Muniz Fatima Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(1983)5ITD183(All.)
AppellantSmt. Muniz Fatima
Respondentincome-tax Officer
Excerpt:
.....year, relevant to the assessment year 1976-77, in question, a salary of rs. 30,000 to her husband, shri ajaz ahmad khan, from the firm khan carpets, bhadohi.when the ito asked the assessee to show why it may not be clubbed with her income under section 64(1)(ii) of the income-tax act, 1961 ('the act'), the assessee filed her written reply dated 20-2-1979 stating as under : (1) shri ajaz ahmad khan had been looking after the correspondence work, banking and other miscellaneous work regarding ports and shipment of carpets, etc. he is also an attorney of the firm authorised to visit all places and offices in connection with firm's business. (2) carpet manufacturing is a highly technical matter and success or perfection in this trade cannot be achieved unless the persons looking after the.....
Judgment:
2. The assessee allowed during the previous year, relevant to the assessment year 1976-77, in question, a salary of Rs. 30,000 to her husband, Shri Ajaz Ahmad Khan, from the firm Khan Carpets, Bhadohi.

When the ITO asked the assessee to show why it may not be clubbed with her income under Section 64(1)(ii) of the Income-tax Act, 1961 ('the Act'), the assessee filed her written reply dated 20-2-1979 stating as under : (1) Shri Ajaz Ahmad Khan had been looking after the correspondence work, banking and other miscellaneous work regarding ports and shipment of carpets, etc. He is also an attorney of the firm authorised to visit all places and offices in connection with firm's business.

(2) Carpet manufacturing is a highly technical matter and success or perfection in this trade cannot be achieved unless the persons looking after the job possess technical knowledge and experience about the whole process involved. Shri Ajaz Ahmad, it is claimed, possesses that technical and special knowledge and experience.

(3) That the assessee's case is saved by the proviso to Section 64(1)(ii) of the Act. According to the assessee, the expression 'knowledge and experience' as used by the Legislature in the proviso is not suggestive of it that it should be supported by a degree or diploma of an university or school.

The ITO observed that Shri Ajaz Ahmad Khan did not hold any college diploma or degree in any branch of art, commerce or science and that all that he may have acquired, was certain amount of experience and knowledge attributable to any businessman since he had been in the carpet trade for quite some time in the past. He was of the view that in the given circumstances, any one else would also have acquired the same experience or knowledge as Shri Ajaz Ahmad Khan gained while earning his livelihood. He, therefore, held that Shri Ajaz Ahmad Khan did not possess any technical or professional qualification within the meaning of the proviso to Section 64(1)(ii). He, therefore, clubbed the salary of Rs. 30,000 paid to Shri Ajaz Ahmad Khan as the income of the assessee under Section 64(1)(ii).

3. Being aggrieved, the assessee came up in appeal before the AAC. On behalf of the assessee reliance was placed before the AAC, on an order dated 13-1-1981 of this Tribunal in Smt Ashima Begum v. ITO [IT Appeal Nos. 1892 and 1893 (All.) of 1979 for the assessment years 1976-77 and 1977-78]. The learned AAC held that the expression 'qualification' implied the possession of a degree or diploma awarded by a body imparting technical or professional education. He held that there was no evidence that Shri Ajaz Ahmad had acquired the qualifications qua carpet trade by working as an apprentice under a master craftsman.

Having regard to the nature of work looked into by Shri Ajaz Ahmad Khan, the AAC took the view that that work could have been done by any other person who had been working in any concern of carpet trade and that the nature of work looked into by him was not of a specialised nature pertaining to the carpet trade. Accordingly, he confirmed the order of the ITO.4. The assessee, being aggrieved, has come up in appeal before us. Shri A.C. Sinha, the learned counsel for the assessee, argued that Shri Ajaz Ahmad Khan possessed technical qualifications and that the salary paid to him was attributable to the application of his technical or professional knowledge and experience. He argued that the possession of a degree or diploma of some body imparting technical or professional education was not necessary. He again relied upon the decision of this Tribunal in the case of Smt. Ashima Begum (supra). He also pointed out that the income-tax authorities had failed to take into consideration the length of association of Shri Ajaz Ahmad with carpet trade during the course of which he acquired the necessary qualification and experience, to which the salary paid was attributable. He also sought to rely upon the assessment order of Shri Ajaz Ahmad Khan for the assessment year in question, in which the salary in question was declared and taxed. He also sought to rely upon the order dated 5-10-1982 of the AAC for the assessment year 1977-78 wherein a similar claim made by the assessee was upheld by the AAC. Lastly, he sought to rely upon two certificates dated 4-11-1982 and 8-11-1982 from the United Commercial Bank, Bhadohi and All India Carpets Manufacturers Association, Varanasi, inter alia, to the effect that Shri Ajaz Ahmad Khan had good experience and expert technical knowledge of carpet business since 19-12-1959 and that he had been associated with carpet manufacture and export business for the last 30 years. On the other hand, Shri R.K. Upadhyay, the learned departmental representative, placed reliance on the orders of the income-tax authorities. He opposed the reception of the aforesaid two certificates in evidence on the ground that they were not before the income-tax authorities and that they had been obtained even after the impugned order dated 17-7-1981 of the AAC and were not supported by any application justifying their reception in evidence. He also submitted that the fact that the AAC had taken a different view in the succeeding assessment year was not relevant. He also pointed out that the fact that Shri Ajaz Ahmad had been assessed on the said income of Rs. 30,000 in his own hands was not material. Reliance was also placed by him on another decision dated September 1979 of this Tribunal in the case of Smt. Leelawati [IT Appeal No. 574 (All.) of 1977-78] in which a view contrary to the view taken by the Tribunal in the case of Smt. Ashima Begum (supra) had been taken. Reference was also made by him to the Special Bench decision of the Tribunal in the case of Dr. J.N. Mokashi v. ITO [1983] 3 ITD 774 (Bom.). He, therefore, argued that there was no warrant for any interference with the order of the learned AAC.5. We have considered the rival submissions as also the decisions referred to above. Section 64(1)(ii) provides that 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 individual by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual has a substantial interest. There is a proviso appended to this clause which says that nothing in this clause shall apply in relation to any income arising to the spouse where the spouse possesses technical or professional qualifications and the income is solely attributable to the application of his or her technical or professional knowledge or experience. Thus in order to avoid clubbing of the salary income of the assessee's husband in the income of the assessee, the following two things had to be established by the assessee : (i) That Shri Ajaz Ahmad possessed technical or professional qualification, and (ii) That the income arising to Shri Ajaz Ahmad was solely attributable to the application of his technical or professional knowledge and experience.

No doubt in the case of Smt. Leelawati (supra) it had been held by the Tribunal that though the term 'technical knowledge' did not imply paper qualifications from the university or college but at the same time the ratio of the decision of Hon'ble Delhi High Court in the case of J.K.(Bombay) Ltd. v. CBDT [1979] 118 ITR 312 had to be followed. It was held in that case that the remuneration paid to Shri Jiya Lal related to managerial and commercial services rendered by him which were not entitled to the benefit of the proviso to Section 64(1)(ii). In the case of Smt. Ashima Begum (supra) the Tribunal took the view that one may acquire technical or professional qualification even by being an apprentice to a master craftsman. On the facts of that case, it was held that Shri Farukh Ali had a rich experience and skill in dying of yarn, colour combination designing and finishing of carpets. It was held that that case was covered under the proviso to Section 64(1)(ii).

However, in the case of Dr. J.N. Mokashi (supra) the assessee, a doctor, was doing independent practice and he employed his wife who had passed only first year arts of a university as receptionist-cum-accountant. There was no evidence to show actual work being done by her. It was held on facts that it could not be said that the salary paid to the assessee's wife was attributable to her technical and professional qualifications within the meaning of the proviso to Section 64(1)(ii). However, it was held that professional qualifications mean fitness to do a job or to undertake an occupation or vocation requiring intellectual skill or requiring manual skill as controlled by intellectual skill and which is such that a person should be believed to take out a living therefrom independently, though the salary ceased to be the product of professional skill merely because a particular employment is accepted. The term 'technical' was held to imply specialised knowledge generally of a mechanical or scientific subject or any particular subject. In the present case, as admitted by the assessee herself before the ITO in her reply dated 20-2-1979, Shri Ajaz Ahmad had been looking after the correspondence work, bank and other miscellaneous work regarding ports and shipments of carpets. He is also an attorney of the firm authorised to visit all places and offices in connection with the firm's business. The nature of work done by Shri Ajaz Ahmad Khan was, therefore, not of any specialised nature so as to be called a work of a technical nature. It could have been done even by any other person who would have been doing this work for some time. As rightly observed by the learned AAC, there was no evidence to the effect that Shri Ajaz Ahmad had acquired any qualifications of carpet trade by working as an apprentice under a master craftsman or in the sense in which professional and technical qualifications had been construed in the decision of the Special Bench of the Tribunal in the case of Dr. J.N. Mokashi (supra). We uphold the objection raised on behalf of the department regarding the admission of new evidence in the shape of certificates dated 4-11-1982 and 8-11-1982 from the United Commercial Bank and All India Carpet Manufacturers Association because they were not placed before the income-tax authorities and were obtained after the impugned order of the AAC and there is nothing on record to show that the assessee had satisfied the requirements of Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. The fact that the AAC had taken a different view in the assessment year 1977-78 would also not help the assessee. Similarly, the fact that the salary income was declared by Shri Ajaz Ahmad in his own assessment and was assessed by the ITO for the assessment year in question would not be material. On the facts and circumstances of the present case, therefore, neither it is established that Shri Ajaz Ahmad possessed any technical or professional qualification nor it is established that the salary paid to him was solely attributable to the application of his technical or professional knowledge and experience.

Here it is also necessary to point out that though the expression 'experience' as provided in Section 64(1)(ii) includes experience acquired in the course of acquiring technical or professional qualifications, the word 'and' appearing twice in the said proviso means 'and' and not 'or'. We, therefore, find no force in this appeal which must fail and be dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //