J M MOKASHI Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) BY this reference under section 256 (1) of the Income-tax Act, 1961 ("the Act"), the income-tax Appellate Tribunal has referred the following question of law to this court for opinion :

(2.) THE assessee is a practising physician and cardiologist. His wife, Smt. Jayashree J. Mokashi, had passed first year Arts of the Bombay University and was employed by him as a receptionist-cum-accountant. During the accounting period, relevant to the assessment year 1978-79, the assessee paid a sum of Rs. 8,100 to her by way of salary. This amount was included by the Income-tax 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.

(3.) 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", and as such, section 64 (1) (ii) had no application to a proprietary concern in which the assessee has 100 per cent. interest. The third contention of the assessee was that possession of "technical or professional qualifications" by the spouse of the assessee does not mean that she must hold a degree of a competent authority or university in a particular technical or professional subject. According to the assessee, it is sufficient if the spouse concerned possesses necessary technical or professional knowledge and experience which might enable her to perform her duties. Another argument of the assessee was that the word "and" appearing twice in the proviso to section 64 (1) (ii) should be interpreted as "or" and, consequently, the proviso should be held applicable if any of the two requirements, viz. , the spouse possesses technical or professional qualifications or the income as attributable to her technical or professional knowledge exists.