1981 (1) TMI 87 - AT - Income Tax

Summary

Issues:
- Disallowance of salary payment to the wife of the assessee under section 64(1)(ii) of the Income-tax Act, 1961.

Analysis:
The case involved an appeal by the assessee regarding the disallowance of a salary payment made to the wife of the assessee for the assessment year 1979-80. The Income Tax Officer (ITO) disallowed the payment of Rs. 3,001 to the wife of the assessee, citing section 64(1)(ii) of the Income-tax Act, 1961, which restricts certain income arising to the spouse of an individual with a substantial interest in a concern. The assessee claimed that the payment was for writing books of account and was attributable to the wife's technical or professional qualifications.

The Assessing Officer (AO) and the Appellate Authority Commissioner (AAC) both upheld the disallowance, stating that the wife of the assessee, being only a matriculate, was not entitled to receive a salary for clerical work. However, the counsel for the appellant argued before the Tribunal that the wife of the appellant possessed technical or professional qualifications, justifying the salary payment under section 64(1)(ii).

The Tribunal analyzed the definition of "technical" and "professional" qualifications, emphasizing the broad interpretation of these terms. It highlighted that a profession involves the exercise of intellectual or manual skill controlled by intellectual skill, and various occupations, including chartered accountants and accounts-keepers, could fall under this definition. The Tribunal concluded that writing books of account required intellectual skill, thus meeting the criteria of possessing technical or professional qualifications.

Ultimately, the Tribunal allowed the appeal, stating that the wife of the assessee had technical or professional qualifications, and the payment of salary was solely attributable to her technical or professional knowledge and experience. The Tribunal held that the disallowance of the salary payment was incorrect, and the assessee was entitled to claim the amount under section 64(1)(ii).

In conclusion, the Tribunal's decision overturned the disallowance of the salary payment to the wife of the assessee, emphasizing the broad interpretation of technical and professional qualifications under section 64(1)(ii) of the Income-tax Act, 1961.