TMI Blog1993 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in the income of the assessee by applying the provisions of section 64(1)(ii) of the Act. The assessee preferred an appeal to the Appellate Assistant Commissioner of Income-tax. The appeal was rejected and the order of the Income-tax Officer was affirmed by the Appellate Assistant Commissioner. The assessee filed a second appeal before the Tribunal. As there were some conflicting decisions of the various Benches of the Tribunal on the point of issue, the Tribunal, by its order dated October 15, 1980, referred the matter to a Special Bench for hearing and decision. Before the Special Bench of the Income-tax Appellate Tribunal, the orders of the Income-tax Officer and the Appellate Assistant Commissioner were challenged on various grounds. The first contention of the assessee was that the word "concern" appearing in section 64(1)(ii) did not include "profession", as distinguished from "business" and, as such, the provisions of the above section were not applicable. The second contention was that the expression "substantial interest" appearing in section 64(1)(ii) read with Explanation 2(ii) referred only to a proportion of the whole interest and not the "whole interest", a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or professional qualification or that the salary paid to her was attributable to any technical or professional knowledge and experience of hers. In view of the aforesaid findings of fact, the Tribunal confirmed the order of the Appellate Assistant Commissioner and the Income-tax Officer. Aggrieved by the order of the Tribunal, the assessee applied to the Tribunal for reference of the question of law arising out of its order to this court for its opinion. The Tribunal, on being satisfied that a question of law did arise, referred the question set out above to this court for opinion. We have heard Mr. V. H. Patil, learned counsel for the assessee, and Mr. G. S. Jetly, learned counsel for the Revenue. Learned counsel for the assessee reiterated all the submissions made on behalf of the assessee before the Tribunal. In support of the same, reliance was placed on the decision of the Andhra Pradesh High Court in Batta Kalyani v. CIT [1985] 154 ITR 59 ; of the Kerala High Court in CIT v. Sorabji Dorabji [1987] 168 ITR 598 and Dr. K. Thomas Varghese v. CIT [1986] 161 ITR 21 ; of the Gujarat High Court in CIT v. Dr. K. K. Shah [1982] 135 ITR 146 and of the Madhya Pradesh High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, owned beneficially by such person or partly by such person and partly by one or more of his relatives ; (ii) in any other case, if such person is entitled, or such person and one or more of his relatives are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent. of the profits of such concern." From a plain reading of section 64(1)(ii) of the Act, it is clear that this section lays down various circumstances under which income of certain family members specified therein, namely, spouse, minor child, son's wife and son's minor child is clubbed with the income of the assessee. Clause (ii) provides that the income derived by the spouse of an individual by way of remuneration, etc., from a concern in which the individual has a substantial interest shall be included in the income of the said individual. The only exception is contained in the proviso to clause (ii) which provides that the said clause shall not apply where the spouse possesses technical or professional qualifications and the remuneration can be solely attributed to the application of such technical or professional knowledge and experience of the spouse. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd callings". It is in this context that in Barendra Prasad Ray v. ITO [1981] 129 ITR 295, the Supreme Court, while interpreting the B expression "business connection" appearing in section 9(1) of the Act, held as follows (at page 306) : "The word `business' is one of wide import and it means an activity carried on continuously and systematically by a person by the application of his labour or skill with a view to earning an income. We are of the C view that in the context in which the expression 'business connection' is used in section 9(1) of the Act, there is no warrant for giving a restricted meaning to it excluding 'professional connections' from its scope." We are, therefore, of the clear opinion that the expression "concern" D appearing in section 64(1)(ii) of the Act is a word of wide import and takes within its sweep and ambit all organisations or establishments engaged in business or profession, whether owned by a company, partnership or individual or any other entity. We now turn to the next contention of the assessee that section E 64(1)(ii) being applicable to concerns in which the assessee has a substantial interest within the meaning of Explanation 2 thereto, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bbed with the income of the spouse provided the "income" too fulfils the requirement of the second part of the proviso. We may, for a better understanding, dissect the requirements of the proviso to section 64(1)(ii) as follows : " (i) The spouse possesses 'technical or professional qualifications'; and (ii) the income is solely attributable to the application of his or her technical or professional knowledge and experience." A serious controversy has been raised by learned counsel for the assessee in regard to the interpretation of these conditions. According to counsel, the "qualification" mentioned in the above clause should be liberally interpreted to mean and include any qualification which makes a person suitable for a job. It should not be given any narrow or restrictive meaning. Secondly, according to counsel, the two conditions set out above should be read harmoniously. The two conditions are not cumulative but alternative, and the use of the words "knowledge and experience" in the second part goes to show that the proviso will be applicable even in cases where the spouse does not possess technical or professional qualification but has the requisite technical or prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, natural or adventitious, which are inherently or legally necessary to render him eligible to fill an office or to perform public duty or office . . . ..." But, the word "qualification" in the proviso to section 64(1)(ii) is qualified by the words "technical or professional". In that view of the matter, its broad meaning will not be relevant for the present purpose. We have, in fact, to ascertain the true meaning of "technical qualifications" or "professional qualifications". "Technical", according to Black's Law Dictionary, means "belonging or peculiar to an art or profession". According to Random House Dictionary of the English Language, "technical", inter alia, means: "1. Pertaining to or suitable for an art...." Similarly, "profession" means a vocation or occupation requiring special, usually advanced education, knowledge, and skill, e.g., law or medical profession. (See Black's Law Dictionary, sixth edition). Halsbury's Laws of England (fourth edition, Vol. 23), describes "profession" as follows:".....A profession involves an idea of an occupation requiring either purely intellectual skill, or if any manual skill is involved, as in painting, sculpture, or surge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient. Thus, the nature of professional qualification will vary from profession to profession. Similarly, the nature of technical qualification will also vary depending on the nature of the technical job. What is technical or professional qualification, therefore, will have to be decided in each case depending upon the nature of the profession or the technical work. But one thing is certain that it is not any and every qualification, academic or otherwise, which can bring a spouse within the scope and ambit of the proviso to take the income out of the clubbing provision. It is the possession of only technical or professional qualification necessary for undertaking the particular technical job or carrying on the profession to which the income is attributed that will meet the requirement of the first part of the proviso. "Knowledge and experience" will not be relevant for that purpose. A spouse, well versed in law and experienced in the working of the legal profession, cannot be said to be in possession of professional qualification for carrying on the legal profession if he or she does not possess the requisite degree or diploma. Payments made to the spouse in such a case for any le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in section 64(1)(ii). Thus, the object of the second part of the proviso is to restrict the benefit of the proviso only to reasonable payments for professional services and to put a check on diversion of income to the spouses possessing technical or professional qualifications in the guise of salary, fees, etc., for professional or technical services with a view to reduce the incidence of tax. The foregoing discussion clearly goes to show that the two conditions mentioned in the proviso are cumulative and not alternative. They deal with two different aspects-one pertains to the eligibility of the spouse to claim benefit of the proviso, the other to the income which would qualify for exclusion from clubbing. Both are relevant and equally important. There is no scope for mixing up the two and diluting the first condition relating to qualification of the spouse by reference to the expression "knowledge and experience" in the second condition. Any attempt to do so will go counter to the clear language, scheme and object of the proviso and the well-accepted rule of interpretation that one part of a section or clause should not be construed in such a manner as to render the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the application of such technical or professional knowledge and experience, the requirements for the application of the proviso are satisfied, although the person concerned may not possess any qualification issued by a recognised body. It was further held that it is enough for the purposes of the proviso if the recipient of the salary possesses the attributes of technical or professional qualification, 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 H person concerned earns a salary, then the latter part of the proviso is also satisfied. We have carefully considered the above decision. In our opinion, for the reasons set out by us in this decision, the interpretation of the proviso by the Andhra Pradesh High Court is not correct. It goes counter to the express language of the proviso. We, therefore, express our inability to agree with the same. In the instant case, the spouse of the assessee neither possessed any technical or professional qualification nor was she paid for any, technical or professional services rendered by her. Admittedly, she had passed first year Arts of the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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