B B SAHU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the Revenue, the following questions have been referred to this Court for adjudication under S. 256(1) of the IT Act, 1961 (in short "the Act"), by the Tribunal, Cuttack Bench (in short "the Tribunal") :

(2.) FROM the statement of case, we find that Sri B. B. Sahu ( hereinafter referred to as "the assessee" ) filed his return of income for the asst. year 1980 -81, wherein it was indicated that a sum of Rs. 16,725 received by him as managing director of M/s Sahu Minerals (P) Ltd., had been shown in the hands of his wife, Smt. Shila Sahu, and, therefore, was not reflected in his return. Reference was made to S. 64(1)(ii) of the Act to state that since Smt. Shila Sahu had substantial interest in the company, the salary income was to be included in her hands. This contention was not accepted by the Assessing Officer who was of the view that the salary was earned because of professional knowledge and experience of the assessee and, therefore, the proviso to S. 64(1)(ii) was applicable. In appeal, the CIT (A), Orissa, affirmed the conclusion of the AO holding that, even if Smt. Shila Sahu was a member of the board of directors and had experience and professional knowledge, the proviso to S. 64(1)(ii) applied and the question of salary earned by the assessee being included in the income of Smt. Shila Sahu did not arise. The assessee's stand as appearing from such contentions was to the effect that it was open to the assessee to include the salary earned by him in the return of income of his wife in terms of S. 64(1)(ii) of the Act. Before the Tribunal, the assessee's stand continued to be the same. The Revenue's stand, as indicated above, was different. The Tribunal, however, proceeded on the basis that, after insertion of the expression "cl. (ii)" in Expln. 1 to S. 64(1) w.e.f. 1st April, 1980, the income specified has to be included in the return of the spouse whose income was higher and, therefore, the income has been rightly assessed in the hands of the assessee. Unfortunately, the Tribunal did not consider the applicability of the proviso on which the Departmental authorities based their conclusions. If the proviso has application, the question whether the Expln. 1 as amended w.e.f. 1st April 1980, would be applicable would be only of academic interest. The Tribunal appears to have made out a new case which was not the case of either the assessee or the Revenue. In that view of the matter, instead of answering the questions referred to us, we direct the Tribunal to rehear the appeal and to adjudicate about the applicability of the proviso to S. 64(1)(ii), as held by the Assessing Officer and the CIT (Appeals). Thereafter, if a necessity arises, it shall consider the applicability of the Expln. 1 as amended w.e.f. 1st April 1980.