1983-VIL-437-KAR-DT

Equivalent Citation: [1984] 145 ITR 791, 41 CTR 301, 18 TAXMANN 495

KARNATAKA HIGH COURT

Date: 18.11.1983

COMMISSIONER OF INCOME-TAX, KARNATAKA I

Vs

SK. NAYAK

BENCH

Judge(s)  : S. R. RAJASEKHARA MURTHY., K. JAGANNATHA SHETTY

JUDGMENT

The judgment of the court was delivered by

JAGANNATHA SHETTY J.-The Income-tax Appellate Tribunal Bangalore Bench, has referred the following question in these two references under s. 256(1) of the IT. Act, 1961, for the opinion of this court :

" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that only the net income of the spouse under salary after deduction under s. 16(1) should be clubbed in the hands of the assessee u/s. 64(1)(ii) and not the gross salary income ? "

The assessee is a managing director of M/s. Colorinks (P.) Ltd., and his wife, Smt. Shalini S. Nayak, has been working as a whole-time director in that company. She was paid remuneration by the assessee. The remuneration paid to her in the assessment year 1978-79 came to Rs. 13,231. The ITO did not allow deduction under s. 16(1) in respect of the remuneration of the assessee's wife. He included the gross salary received by her in the total income of the assessee under s. 64.

The assessee preferred an appeal before the AAC, who accepted the appeal by holding that s. 64 speaks of " income " and the concept of " income " should, in the context, be the net income after allowing expenses and deductions, which the law permits. Accordingly, he gave the relief to the assessee.

The Revenue challenged the decision of the AAC before the Appellate Tribunal. But the Tribunal did not take a different view. It dismissed the appeal.

The short question that arises for consideration is whether s. 64(1) permits clubbing of net income of the spouse or the gross income. Section 64(1)(ii) provides for clubbing the income of the spouse with the income of the assessee received by the former by way of salary, commission, fees or any other form of remuneration from a concern in which the assessee has a substantial interest. There is, in this case, no dispute regarding the clubbing of the income of the wife with the assessee's income. The dispute is only as to whether the income of the wife should be the gross income for the purpose of clubbing or the net income after allowing the expenses and standard deductions.

It seems to us that this question should not detain us longer. If the wife herself had been the assessee, there would not have been any doubt as to her right to compute her net income. She is entitled to the standard deductions and other expenses. If that is so, we fail to see any good reason why gross income should be clubbed with the income of her husband under s. 64. It would be contrary to the scheme of the Act itself not to allow deductions before clubbing the income. We find no justification to take a view different from the one reasonably reached by the Tribunal.

In the result, we answer the question in the affirmative and against the Revenue.

 

 

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