HIGH COURT OF ALLAHABAD

Commissioner of Income-tax

v.

Navneet Priya Das

R.K. AGRAWAL AND VIKRAM NATH, JJ.

IT REFERENCE NO. 338 OF 1982

July 27, 2006

Section 64 of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse etc, - Assessment year 1977-78 - Assessee paid certain amount as salary to his wife in view of her professional knowledge and experience - However, same was disallowed by Assessing Officer under section 64(1)(ii) and section 40A(2) - Whether since assessee’s wife had professional knowledge and experience and was paid salary on account of her having professional knowledge and experience, remuneration paid to her was allowable and was not to be clubbed in hands of assessee under Section 64(1)(ii) - Held, yes

FACTS

The assessee individual, paid certain amount as salary to his wife in view of her professional knowledge and experience. However, it was disallowed by the Assessing Officer under section 64(1)(ii) and section 40A(2). The appellate authority remitted the matter to Assessing Officer for consideration afresh - On second appeal, the Tribunal based on its decision for the assessment year 1972-73, upheld the assessee’s claim for remuneration paid to his wife for the assessment year 1976-77. The Tribunal held that the assessee’s claim for the remuneration paid to his wife was allowable was not to be clubbed in the hands of the assessee under section 64(1)(ii).

On reference:

HELD

The assessee’s wife had professional knowledge and experience and was paid salary on account of her having professional knowledge and experience. In the case of CIT v. Major B. Kaur [2004] 265 ITR 345 (All.) it was held that the provisions of the section 64(1) could not be made applicable in a case where the spouse, who was working in the concerned office in which the individual had substantial qualifications. [Para 5]

Following that decision, no illegality was found in the order of the Tribunal. The Tribunal had rightly allowed the remuneration paid to the assessee’s wife and held that it was not liable to be clubbed in the case of assessee under section 64(1)(ii). [Para 6]

CASE REVIEW:

CIT v. Major B. K. Kaur [2004] 265 ITR 345 (All.) followed. [Para 6]