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TMI Blog1991 (4) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... after observing due process of law enhanced the assessments for these years by the amounts of remuneration/commission received by Shri Gunwant J. Shah in the assessments of the assessee for these years. Hence the appeals by the assessee to the Tribunal. 3. The relevant facts are that the assessee is a partner in M/s. Pooja Sales Corporation at Udgaon holding 80% of share of profit therein. Therefore, she is substantially interested in that concern. The firm paid remuneration of Rs. 24,000 each for these years and a commission of Rs. 8,200 for the assessment year 1988-89 to Shri Gunwant J. Shah, the spouse of the assessee. He is a Commerce Graduate holding B.Com. degree of the Pune University awarded in the year 1974. Original assessments were completed by the assessing officer without invoking the provisions of section 64(1)(ii) of the Income-tax Act, 1961. This was considered to be erroneous insofar as it was prejudicial to the interest of revenue inasmuch as Shri Gunwant J. Shah did not possess any technical or professional qualification and hence should have included the remuneration and commission received by him in the assessment of the assessee in terms of section 64(1)(ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on. On the other hand, relying on the order of the Tribunal, Special Bench, in the case of Dr. J.N. Mokashi he submitted that guidelines have been laid down by the Tribunal regarding technical and professional qualifications and experience to be adopted and if so adopted the case of the assessee falls squarely within the proviso to section 64(1)(ii) and therefore, the orders passed by the assessing officer were not erroneous and prejudicial to the interest of revenue and the CIT was not justified in invoking the jurisdiction under section 263 of the Income-tax Act, 1961. 5. The learned departmental representative, on the other hand, relied on the judgment of the Karnataka High Court in the case of D. Rajagopal wherein strict interpretation was adopted by the High Court. 6. In reply, the learned counsel for the assessee submitted that the spouse of the assessee is maintaining accounts of the firm and looks after the sales and recoveries from the debtors and therefore, commerce degree possessed by him is most useful to the concern and therefore, remuneration and commission paid was attributable to the professional knowledge and experience. 7. After due consideration of the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the very beginning of assessment that the salary paid as managing director of the firm should be excluded from his assessment in terms of section 64(1)(ii) of the Income-tax Act, 1961 and should be included and assessed in the hands of his wife. This clearly shows that there was admission on the part of the assessee that he did not possess the requisite technical and professional qualification so as to justify the assessment of salary in his own hands. The ITO included the salary in the assessment of Shri D. Rajagopal and the AAC confirmed the assessment. The Tribunal reversed the order of the AAC and while doing so, it gave a finding of fact that the assessee did not possess any technical or professional qualification in terms of section 64(1)(ii) of the Income-tax Act, 1961 and, therefore, the salary income of the assessee should be excluded from his assessment and included in the income of the spouse who was a partner in the said firm because she had substantial interest in the firm being 80% shareholder. Therefore, the finding of the Tribunal which is a fact finding authority is in consonance and in harmony with the contentions of the assessee that he did not possess t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of such technical or professional knowledge and experience, the requirement for the application of the proviso is satisfied, although the person concerned may not possess any qualification issued by a recognised body. In our opinion, the Tribunal erred in coming to the conclusion that unless a recognised body conferred a qualification, it should not be considered that a person possessed technical or professional qualifications. It is enough, in our opinion for the purpose of the proviso if the recipient of the salary possesses the attributes of technical or professional qualifications, in the sense that he has got expertise in such profession or technique. If by the use of that expertise in the profession or technique, the person concerned earns salary, then the latter part of the proviso is also satisfied." Though the judgment in that case was against the assessee, the harmonious construction laid down is quite relevant. It would be clear from the aforesaid observations that if the attributes of technical or professional qualification are possessed by the recipient of the salary which means expertise in such profession or technique and by use of such expertise the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to the application of technical or professional knowledge and experience. Since majority of the High Courts is in favour of the assessee, i.e., in favour of application of proviso to section 64(1)(ii), I prefer to follow the majority view rather than the view of the Karnataka High Court relied upon by the CIT. 14. Further the Special Bench of the Tribunal had occasion to resolve the conflict of decisions among the Benches of the Tribunal on this vexed issue in the case of Dr. J.N. Mokashi. The relevant observations of the Special Bench are as follows : " 36. Thus, we see that the term ' technical ' is understood to include certain characteristics of specialisation relatable to a particular subject. The term ' profession ' is sometimes used in a narrow sense so as to mean the learned professions or an occupation requiring a high level of training and proficiency. In a wide sense, it means any calling involving intellectual skill or manual skill ultimately controlled by intellectual skill. In a still wider sense, it means any calling or occupation by which a person habitually earns his living. This is as per the Shorter Oxford English Dictionary. Thus while the narrow meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , even when he works under one employer provided the mode of keeping accounts calls for intellectual skill. Therefore, an indication or a test for finding whether professional skill is involved is to see whether it requires or postulates intellectual skill or manual skill as controlled by intellectual skill and can furnish a source of independent livelihood to the person though that person might accept employment from his or her spouse. If on the other hand, the skill is such that it is not possible, hypothetically or objectively speaking to earn an independent livelihood as in the case of a professional typist or a professional accounts-keeper, it will not be possible to term it as involving professional qualifications. Again ' technical ' would involve specialised training in a mechanical or scientific subject or in any particular subject. Therefore, each case will have to be decided on its own facts. We can only lay down general tests or principles as stated above. 38. The second requirement of the proviso to section 64(1)(ii) is that the payments made to the spouse must be attributable to the application of technical or professional knowledge and experience. In fact, Shri Dast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the proviso to section 64(1)(ii) includes experience acquired in the course of acquiring technical or professional qualifications." 15. From the aforesaid decision of the Tribunal, applying wide sense of the term ' technical ' any calling involving intellectual skill or manual skill ultimately controlled by intellectual skill would be covered by the term ' technical '. The Tribunal E Bench, Ahmedabad in the case of Dr. N.J.P. v. ITO [1983] 2 SOT 288 held as under : " Looking to the words used in section 64(1)(ii), a wide and liberal construction should be given to the word ' technical ' or ' professional ' qualifications and anything which involves exercise of intellectual skill or of manual skill controlled by intellectual skill should come within the ambit of these words. An indication or a test for finding whether professional skill is involved is to see whether it requires or postulates intellectual skill and can furnish a source of independent livelihood to the person though that person might accept employment from his or her spouse. If, on the other hand, the skill is such that it is not possible, hypothetically or objectively speaking, to earn an independent livelihood a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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