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Major Birendra Singh Negi Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Patna
Decided On
Judge
Reported in(1985)13ITD369(Pat.)
AppellantMajor Birendra Singh Negi
Respondentincome-tax Officer
Excerpt:
.....line from kiran indane service as per certificate dated 26-8-1974 given by the latter.the assessee paid salary of rs. 8,400 per annum to the manager for running the business. the assessee could not have appointed any person he liked as manager unless he is properly trained in handling the dangerous gas because that is a condition laid down by the indian oil co. all these things were stated by the assessee before the ito in his letter dated 25-1-1983. the ito did not accept the contention of the assessee on the ground that the wife of the assessee could not be said to possess technical or professional qualifications for which the salary was paid. hence, he added the salary of rs. 8,400 paid by the assessee to his manager-wife invoking the provisions of section 64(1)(ii). the assessee.....
Judgment:
1. This appeal has been filed by the assessee against the order dated 3-3-1984 of the AAC, the previous year of which ended on 31-3-1980.

2. The assessee is an individual deriving income from pension and business as a dealer in Indane Gas.

3. The only dispute in this appeal is whether the salary paid by the assessee to his manager, who happens also to be his wife, could be added under Section 64(1)(ii) of the Income-tax Act, 1961 ('the Act') to the income of the assessee or the said salary is excludible from such inclusion under the proviso to the said section. The case of the assessee was that his wife was acting as the manager of the Indane business while the assessee was looking after the work relating to the Bank, attending other office work and the matters generally connected with the places outside its business premises. The manager was solely incharge of the business premises, the godown where the Indane Gas is stored and running the business of storing and supplying the gas cylinders to the consumers as well as getting the ovens repaired as and when needed by the consumers. He further stated that the Indian Oil Co.

does not allow any person to act as a distributor of the Indane Gas unless he has undergone the requisite training for handling the dangerous gas. The assessee himself was a trained person in handling inflammable gas. His wife also got the training in that line from Kiran Indane Service as per certificate dated 26-8-1974 given by the latter.

The assessee paid salary of Rs. 8,400 per annum to the manager for running the business. The assessee could not have appointed any person he liked as manager unless he is properly trained in handling the dangerous gas because that is a condition laid down by the Indian Oil Co. All these things were stated by the assessee before the ITO in his letter dated 25-1-1983. The ITO did not accept the contention of the assessee on the ground that the wife of the assessee could not be said to possess technical or professional qualifications for which the salary was paid. Hence, he added the salary of Rs. 8,400 paid by the assessee to his manager-wife invoking the provisions of Section 64(1)(ii). The assessee appealed to the AAC, but without any success.

4. Shri K.N. Jain, the learned representative for the assessee, urged before me that the claim of the assessee should have been accepted. He drew my attention to the decisions of the Tribunal, Calcutta Bench 'C', in the cases of ITO v. Smt. Suseela [1981] 12 TTJ 294 and ITO v. C.K.Nirrmla [1981] 12 TTJ 460 in which similar points have been decided in favour of the assessee. He also referred to the decision of the Special Bench of the Tribunal in the case of Dr. J.N. Mokashi v. ITO [1983] 3 ITD 774 (Bom.) wherein the Special Bench of the Tribunal has held that even steno-typists can be held to possess technical skill. Hence, he urged that the manager who was trained in handling the dangerous gas certainly possessed technical qualifications. The salary paid was only Rs. 700 per month which cannot be said to be high because it is not possible to get any manager with such qualifications and experience as the wife of the assessee for a smaller salary. Shri H. Lal, the learned representative for the department, on the other hand, supported the order of the AAC. He pointed out that similar claims of the assessee had been disallowed in the assessment years 1976-77 and 1977-78 and the assessee did not file any appeal. As the assessee had already accepted this matter, there is no merit in the contentions now raised by the assessee. Further, he urged that the salary paid was excessive because the assessee himself could have carried on the business because of his own training and the high salary was paid to the manager only because she happened to be his wife.

5. Shri K.N. Jain replied that each assessment year is separate and self-contained and the principle of estoppel does not apply to the Income-tax proceedings. He stated that the assessee was not able to get a qualified and experienced person as manager for any smaller salary and so he was forced to appoint his wife on that low salary, even though he did not intend to do so. He was not able to attend both to the outdoor and indoor work of the business and so was compelled to appoint a manager.

6. I have considered the contentions of both the parties as well as the facts on record. In the case of Dr. J.N. Mokashi (supra), the Special Bench of the Tribunal has held that professional qualifications mean skill (not wholly manual) which would enable its possessor to earn a living without taking an employment under an employer. Technical qualification mean specialised knowledge. Experience includes that acquired while acquiring professional or technical qualifications. The handling of Indane Gas which is highly inflammable is certainly a specialised job. Huge quantities of cylinders filled with the deadly gas had to be properly stored in a godown; they have to be carefully taken out and installed properly at the premises of the consumers.

Further, one should have the technical skill to repair the domestic and commercial ovens used by the customers. These are technical qualifications and experience. The manager of the assessee has acquired these trainings and qualifications as is evident from the certificate dated 26-8-1974. Since that day, she had acquired further experience till the previous year under consideration. It is not for the ITO to say that the assessee himself should have done both the indoor and outdoor work of the assessee's business. The manner in which the business is to be carried on lies within the sole discretion of the assessee himself. Even managing a fairly large business is considered to be a specialised job requiring professional knowledge regarding managerial skill. In these days of high cost of living, the small salary of Rs. 700 cannot be said to be unreasonable considering the nature of the service rendered by the manager of the assessee.

Considering all the relevant facts and circumstances of the case, I hold that the salary paid by the assessee to his manager is saved by the proviso to Section 64(1)(ii) and so the same is not includible in his total income. For the reasons, stated above, I delete the sum of Rs. 8,400.


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