INCOME TAX APPELLATE TRIBUNAL, MADRAS
T. V. K. NATARAJA CHANDRAN, A. Krishnamurthy, JJ.
Smt. D. Sampathdevi -Appellant
Versus
Sixth Income-tax Officer -Respondent
IT APPEAL NO. 306 (MAD.) OF 1984
Decided On : 28-09-1984
Advocates Appeared:
P. Narasimhan,S. V. Jagannathan
ORDER
A. Krishnamurthy, Judicial Member - The assessee Smt. D. Sampathdevi is engaged in the business of pawn-broking and petrol bunk business. For the relevant assessment year 1980-81 under appeal, for which the previous year ended on 31st March, 1980, she claimed an expenditure of Rs. 12,000 as salary paid to her husband for managing the affairs of the business. The ITO disallowed this claim stating that the assessee's husband is not in any way technically qualified person, that the business has been carried on in the past for a number of years without his assistance and therefore, there was no justification for employing the assessee's husband at such a salary. When the matter was carried in appeal by the assessee to the AAC, the latter upheld the action of the ITO and dismissed the assessee's appeal. The AAC noted the contentions of the assessee before him that the assessee being a lady requires a person for proper and efficient conduct of the business, that her husband Shri D. Dharmichand Sowcar has rich experience in pawn-broking and petrol bunk business having been with his father, who was running a pawn-broking and petrol bunk business for a number of years and that he was having the requisite knowledge and experience over twenty years in this line. It was also the contention of the assessee before him that the nature of the business is such that it calls for skill and knowledge with experience to tackle problems and meeting with the legal requirements under pawn- broking, etc. The nature of the service rendered was also indicated as set out in his order. The AAC after considering the provisions of section 64(1)(ii) and its proviso has held that the proviso exempts from the mischief of section 64(2) only cases where the spouse possesses technical or professional qualification and income is solely attributable to the application of the person's technical or professional knowledge and experience. According to him the business in Pawn-braking and petrol bunk business does not call for any "technical and professional qualification." It is therefore held that the assessee has not produced enough evidence to prove that the case fall within the exemption proviso. Aggrieved by his order, the assessee is in further appeal.
2. The contention of the learned Representative for the assessee in the first place is that the provisions of section 64(1)(ii) are not attracted to a case of a proprietary business. According to him the use of the expression "concern" in which an individual has substantial interest denotes not a proprietary concern, but one like a partnership or a concern in which the individual has got substantial interest as defined in Explanation 2. It does not take in, according to him, the proprietary concern of an individual. It is further pointed out that a similar expression "substantial interest" also appears in section 40A(2), Explanation. According to the definition of substantial interest in both the sections, a person is said to have substantial interest in a business wherein it is carried on by a company, the person is the beneficial owner of shares carrying not less than 20 per cent voting power and in any other case his beneficial interest is not less than 20 per cent of the profits of the business. It is also pointed out that according to section 40A(2), the remuneration paid to a relative of an individual carrying on business is an admissible deduction except to the extent it is found to be excessive or unreasonable having regard to the fair market value of the services for which the payment is made and the legitimate needs of the business or benefits derived therefrom. Secondly it is argued that the husband of the assessee should be held to possess the requisite technical qualification and experience and therefore the remuneration should be held to fall within the provisions of section 64(1)(i) of the Income-tax Act. The learned Departmental Representative in reply contended that section 40A(2) is not attra
Click Here to Read the rest of this document
Back
