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1987 DIGILAW 408 (KER)

COMMR OF INCOME-TAX v. DORABJI

1987-08-19

PARIPOORNAN, SREEDHARAN

body1987
Judgment :- 1. At the instance of the Revenue the Income Tax Appellate Tribunal has referred the following question of law for the decision of this Court: "Whether, on the facts and in the circumstances of the case the Tribunal was right in law and fact in holding that the spouse of the assessee had acquired the necessary professional qualification as contemplated in the proviso to S.64(1)(ii) of the I.T. Act, 1961, by virtue of her long experience in the service of the company, and, therefore, the salary received by her cannot be included in the assessment of the assessee, namely, Shri Sorabji Dorabji?" 2. The respondent is an assessee to Income tax. We are concerned with the assessment year 1978-79. A sum of Rs. 8,400/- was included in the assessable income of the assessee for the year 1978-79. The said sum represented salary paid to his wife, Mrs. Soonoo Sorabji, who was a director of the company M/s. Sorabji And Co. (P) Ltd. The respondent assessee has substantial interest in the company. The Income Tax Officer invoked the provisions of S.64(1)(ii) of the Income Tax Act. The assessee claimed that the income should not be included in view of the proviso to the said section. This plea was rejected. The Income Tax Officer took the view that the wife of the assessee, Mrs. Soonoo Sorabji, did not possess any technical or professional qualification. In the appeal tiled by the assessee, the Appellate Assistant Commissioner adverted to the fact that the lady has been a Director of the Company from the very inception in 1963 and she was actively engaged in the business of the company. He also held that she had acquired professional skill and qualification by virtue of her long experience as a director of the company and so, in the circumstances, the income of Rs. 8,400/- paid to her was attributable to the application of her professional knowledge and experience. In this view, he held that the salary paid to Smt. Soonoo Sorabji (Mrs. Sorabji Dorabji) was not includible in assessing the respondent. 8,400/- paid to her was attributable to the application of her professional knowledge and experience. In this view, he held that the salary paid to Smt. Soonoo Sorabji (Mrs. Sorabji Dorabji) was not includible in assessing the respondent. According to the Appellate Assistant Commissioner, in the line of business carried on by the assessee, namely, steamer agents and clearing and forwarding agents, there is no degree or diploma coarse available and so the long experience acquired by Smt. Soonoo Sorabji should be taken to be the technical or professional qualification acquired by experience. The Revenue filed an appeal before the Income Tax Appellate Tribunal. The Appellate Tribunal concurred with the Appellate Assistant Commissioner and held that the sum of Rs. 8,400/-would fall within the proviso of S.64(1)(ii) of the Income Tax Act. The Appellate Tribunal held: "It is clear that Smt. Sorabji Dorabji (? Soonoo Sorabji) has acquired sufficient professional experience by virtue of her experience as a director from 1963 onwards. The acquisition of such expertise by virtue of her experience as a director from 1963 onwards. The acquisition, of such expertise would amount to possessing a professional qualification as contemplated in the proviso to S.64(1)(ii). The salary that is paid to her should be attributed to the application of her professional knowledge and experience. It is not an excessive remuneration paid to her because she is a director of the company and because the assessee has a substantial interest in that company. It is only a salary of Rs. 700/-per mensem which would be a normal remuneration that would be payable to a person of the experience of Smt. Sorabji Dorabji (? Smt. Soono Sorabji)." The Revenue filed an application under S.256(1) of the Act to refer certain questions of law for the decision of this Court. Accordingly the Appellate Tribunal has referred the question of law, extracted herein above, for our decision. 3. We heard counsel for the Revenue Mr. N. R. K. Nair and counsel for the respondent Mr. Nagendran. It was contended that it cannot be said that Mrs. Sorabji Dorabji possessed technical or professional qualification and that the income is solely attributable to her technical or professional knowledge and experience within the meaning of the proviso to S.64(1)(ii) of the Income Tax Act. On the other hand, counsel for the assessee, Mr. Nagendran, submitted that considering the long experience of Mrs. Sorabji Dorabji possessed technical or professional qualification and that the income is solely attributable to her technical or professional knowledge and experience within the meaning of the proviso to S.64(1)(ii) of the Income Tax Act. On the other hand, counsel for the assessee, Mr. Nagendran, submitted that considering the long experience of Mrs. Sorabji Dorabji, for well-nigh over two decades, she should be held to have sufficient professional knowledge and experience and so the reasoning and conclusion of the Appellate Tribunal is justified in law. 4. Having heard the rival contentious of the parties, we are of the view that the Appellate Tribunal was justified in holding that Mrs. Sorabji Dorabji has sufficient professional knowledge and experience entitling her to the salary of Rs. 700/- per mensem as a Director. She has been a director of the Company from 1963 onwards. She should have acquired sufficient experience in the line. We do not think that the context in which the crucial words in the Proviso to S.64(1)(ii) occurs, namely, "technical or professional qualifications" or "technical or professional knowledge or experience", requires a degree or diploma of a University or other similar institution. The practical experience acquired by Mrs. Sorabji Dorabji by virtue of her being a Director in the line for a sufficiently long number of years, will be sufficient to hold that she has professional knowledge and experience in the line. In this context, we would usefully quote the observations of the Andhra Pradesh High Court in the decision reported in Batta Kalvani v. Commissioner of Income Tax (154 ITR 59) at page 62. Delivering the judgment of the Bench, Anjaneyulu, J. observed as follows: "We find considerable force in the submission of the learned counsel for the assessee that the words "technical or professional qualifications" occurring in the first part of the proviso do not necessarily relate to the technical or professional qualifications acquired by obtaining a certificate, diploma or a degree or in any other form from a recognised body like a university or an institute. That this was not the intention of the legislature is clear from the use of the expression "knowledge and experience" in the latter part of the proviso, as otherwise it would have been perfectly permissible for the Legislature to use the same expression as occurring in the first part. That this was not the intention of the legislature is clear from the use of the expression "knowledge and experience" in the latter part of the proviso, as otherwise it would have been perfectly permissible for the Legislature to use the same expression as occurring in the first part. The harmonious construction of the two parts of the proviso, in our opinion, would be that if a person possesses technical or professional knowledge and the income is solely attributable to the application of such technical or professional knowledge and experience, the requirement for the application of the proviso is satisfied, although the person concerned may not possess any qualification issued by a recognised body. In our opinion, the Tribunal erred in coming to the conclusion that unless a recognised body conferred that a person possessed technical or professional qualifications. It Is enough, in our opinion, for the purpose of the proviso, if the recipient of the salary possesses the attributes of technical or professional qualifications, in the sense that he has got expertise in such profession or technique. If by the use of that expertise in the profession or technique, the person concerned earns salary, then the latter part of the proviso is also satisfied." We concur with the said observations. 5. The question as to whether Smt. Soonoo Sorabji (Mrs. Sorabji Dorabji) had sufficient technical or professional knowledge and experience, is ordinarily a question of fact. As the final fact finding authority, the Appellate Tribunal has found that she has such technical or professional knowledge and experience. It has not been shown that the said finding is in any way irrational or unsustainable. In the circumstances, we answer the question, referred to us in the affirmative, against the Revenue and in favour of the assessee. A copy of this judgment under the seal of this Court and the signature of the Registrar will be sent to the Income Tax Appellate Tribunal, Cochin Bench.