COMMISSIONER OF INCOME-TAX VS R. BHARATHI, 2001 PTD-MADRAS-HIGH-COURT-INDIA 3552 (1998)

(a) Income‑tax‑‑

‑‑‑‑Total income‑‑‑Inclusions in total income‑‑‑Income of spouse from concern in which assessee has substantial interest‑‑‑Exclusion from provision where spouse has professional or technical qualification‑‑‑Exclusion provision should be construed liberally‑‑‑Qualification is not restricted to those recognised by universities ‑‑‑Assessee owning jwellery shop‑‑‑Spouse of assessee having skill and experience in evaluating jewellery‑‑‑Salary paid to spouse was not includible in total income of assessee‑‑‑Indian Income Tax ,Act, 1961, S.64.

A beneficial provision should be liberally construed. While construing the provisions of a statute, due consideration should be given to the context in which it occurs, the object of the provision as also the fact that the statute is meant to be applied uniformly to all and is not meant to be applied to a few. The object of section 64(1)(ii) of the Income Tax Act, 1961, is to ensure that the income received by the assessee is not diverted by claiming that apart of that income has been paid by way of remuneration to the spouse. Having regard to the intimate relationship between the spouses, the income received by one of them from the business owned or run by the other is presumed to be the income earned by the spouse who owns or runs the business except in the cases covered by the proviso. The proviso to section 64(1)(ii) is meant to be applied to all assessees irrespective of their qualification or the nature of the trade or business carried on by them. The spouse of such an assessee would be governed by the proviso to section 64(1)(ii). The words "technical or professional qualification" do not necessarily connote a qualification conferred by a recognised university after examining the candidate who has undergone a course of study in the technical subject or a course of study preparing him for a profession like law, accountancy, etc. The term "qualification" must be given a wide meaning as referring to the qualities which are required to be possessed by a person performing the work that he does, so long as that work is capable of being regarded as technical or professional. The word "professional" is, a term capable of very broad meaning and would encompass varieties of occupation, although the term is also capable of being given a limited meaning where the context so requires. In the context in which the words "professional qualifications" are used in the Act, it is not possible to hold that Parliament intended to confine the scope of the proviso only to the professional such as medicine, law, engineering or accountancy. A large number of occupations that are being practised and which form a source of livelihood are capable of being regarded as professions, so long as they require a degree of skill. The degree of skill required is matter for examination in each case. A person having skill, experience and competence in that line of work can be regarded as professionally qualified for the purpose of section 64(1)(ii), proviso.

The assessee's husband was a jeweller in the jewellery shop owned by the assessee and the Income‑tax Officer held that the salary paid to the husband was liable to be clubbed with the assessee's income. The Tribunal held that the benefit of the proviso to section 64(1)(ii) should not be denied to the husband of the assessee. On a reference:

Held, that the experience of the husband of the assessee in the line of business in evaluating the jewellery could be equated to the professional and technical qualification referred to in the proviso to section 64(1)(ii). The Tribunal was right in law in holding that the salary paid by the assessee to her husband should not be clubbed under section 64(1)(ii).

Batta Kalyani v. CIT (1985) 154 ITR 59 (AP) and Dr. J.M. Mokashi v. CIT (1994) 207 ITR 252 (Bom.) ref.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Beneficial provision must be construed liberally‑‑‑Construction of provision must be made having regard to its context and purpose.

C.V. Rajan for the Commissioner.

Philip George for the Assessee

JUDGMENT

R. JAYASIMHA BABU, J.‑‑‑The question referred to us, at the instance of the Revenue is as to whether the salary paid to the husband of the assessee for the services rendered by him as a jeweller in the jewellery shop owned by her is required to be clubbed with the income of the assessee and the benefit of the proviso to section 64(1)(ii) of the Income Tax Act, 1961, should be denied to the husband of the assessee.

In the statement of the case, it is stated that the Department had contended before the Tribunal that the experience of the husband of the assessee in the line of business in evaluating the jewellery could not be equated to the professional and technical qualifications referred to in the proviso to section 64(l)(ii) of the Act and that the possession of professional knowledge and experience was not a substitute for the possession of technical qualification. The same contention has been advanced before us by learned counsel for the Revenue.

Counsel contended that Parliament has advisedly used the expression. "professional or technical qualification" in the proviso to section 64(1)(ii) of the Act and that unless one possesses professional or technical qualification, mere application of his technical or professional knowledge and experience would not be sufficient to render his income immune from being clubbed with that of other spouse.

Learned counsel for the Revenue submitted that this proviso was introduced by Parliament with a view to enable professionals like Advocates, doctor; chartered accountants to carry on practice in partnership and to provide for separate assessment of income derived from such practice by the spouses as had they practised the same profession individually, their income would have been treated separately for the purpose of taxation. Counsel, therefore urged that the application of this proviso should be confined to the cases where the spouses had undergone a course of study in a University or other certifying body and obtained a degree, diploma and other qualifications recognised by the professional body, enabling the spouse to obtain a certificate to practise the profession. Counsel also emphasised the fact that qualifications referred to in the proviso are professional and technical, and not a mere acquisition of degree in any subject from the University.

Having regard to the object of tile section and the language employed therein, we do not find it possible to agree with these submissions. The object of section 64(1)(ii) of the Act is to ensure that the income received by the assessee is not diverted by laming that 3 part of that income has been paid by way of remuneration to ~e spouse. Having regard to the intimate relationship between the spouses, the income received by one of them from the business owned or run by the other is presumed to be the income earned by the spouse who owns or runs the business except in the cases covered by the proviso.

The proviso to section 64(1)(ii) is meant to be applied to all assessees irrespective of their qualification or the nature of the trade or business carried on by them. The spouse of such an assessee would be governed by the proviso to section 64(1)(ii). The proviso in terms does not limit its application to the professions such as medicine, law, engineering or accountancy. Undoubtedly, all those professions are governed by the proviso. It is easily conceivable, as is in fact the case here, that the business run by one of the spouses in which the other is employed, is not one which required any professional knowledge of medicine, law, engineering, accountancy or the like. We do not find it possible to subscribe to the view that Parliament intended to discriminate and to deny the benefits conferred on the spouse who has acquired a degree or diploma and is eligible to practise a recognised profession for which a course of study and training is provided to numerous other professions which are learnt over a period of time by practice, training, apprenticeship experience and knowledge in that line of work.

We can take judicial notice of the fact that Universities do not offer courses for every avocation in life. There are numerous avocations for which courses of study in the University are not readily available. There are numerous avocations which are not regulated by professional bodies. Nevertheless such professions are carried on, and they constitute the source of livelihood for those who engage in such professions. Cobblers, tailors, or jewellers to cite a few of such profession, carry on their avocation after having acquired experience in that line of work and gathered knowledge on their way and by exercising their skill they are able to derive income to sustain themselves. The fact that there is no course of study prescribed for such avocations and there are no professional bodies to regulate their entry into these and conferment of right to practise such professions, cannot have the effect of denying to those who are engaged in such trade or profession their right to receive income without having the same clubbed with the income of the spouse solely on the ground that there is no prescribed course of study in the Universities for such trade or profession.

While construing the provisions of a statute, due consideration should be given to the context in which it occurs, the object of the provision as also the fact that the statute is meant to be applied uniformly to all and is not meant to be applied to a few. The income of every spouse irrespective of his or her station in life, or whether he or she resides in a rural and urban area or whether his or her income is very substantial or barely above the non?-taxable limit is meant to be regulated by section 64(1) of the Act. The provision has to be so construed as to make it possible for all those subjected to that section to claim the benefits conferred by it to the extent to which they are eligible.

The word "technical or professional qualification" do not necessarily cannot a qualification conferred by a recognised University after examining the candidate who has undergone a course of study in the technical subject or a course of study preparing him for a profession like law, accountancy, etc. The term 'qualification" must be given a wide meaning as referring to the qualities which are required to be possessed by a person performing the work that he does so long as that work is capable of being regarded as technical or professional. The word "professional" is a term capable of very broad meaning and would encompass varieties of occupation, although the term is also capable of being given a limited meaning where the context so requires. In the context in which the words, "professional qualifications" are used in the Act, it is not possible to hold that Parliament intended to confine the scope of the proviso only to the professions such as medicine, law, engineering or accountancy. A large number of occupations that are being practised, and which form a source of livelihood are capable of being regarded as professions as long as they require a degree of skill. The degree of skill required is a matter for examination in each case. A person having skill, experience and competence in that line of work can be regarded as professionally qualified for the purpose of section 64(1)(ii), proviso.

It is not the case of the Revenue that the husband of the assessee did not have any knowledge of jewellery or he was incapable of rendering any assistance in the running of the jewellery business or that he did not have the expertise in appraising gold items of jewellery. All that was contended was that he did not have a degree or diploma in that subject conferred by a recognised University or equivalent institution. Having regard to the object of the section and the liberal interpretation required to be given to the expressions used in the proviso, we find that the spouse of the assessee did possess technical or professional qualification, knowledge and experience in the business run by the assessee. The remuneration paid to him for his services is, therefore, not to be clubbed with the income of the assessee.

A view similar to the one taken by us in giving a liberal" interpretation to the terms employed in the proviso has been taken by the Andhra Pradesh High Court in the case of Batta Kalyani v. CIT (1985) 154 ITR 59.

Learned counsel for the Revenue placed strong reliance on the decision of the Bombay High Court in the case of Dr. J.M. Mokashi v. CIT (1`994) 207 ITR 252, where the Court held that Parliament had used the words "knowledge and experience" in the latter part of the proviso to convey a meaning different from that assigned to the term "technical or professional knowledge" in the earlier part of the proviso and further held that the conditions regarding qualification, knowledge and experience are cumulative. We are entirely in agreement with the view that the conditions prescribed in the proviso are cumulative and must be met before the benefit of the proviso can be claimed by any spouse. It is not enough that a spouse has a qualification but knowledge and experience in the line of work are necessary. Knowledge and qualification possessed by the spouse must have been utilised for earning remuneration from the other spouse. A doctor whose wife may own a large departmental store cannot claim that any remuneration that he receives from his wife is not to be clubbed merely on the ground that he has professional qualification in medicine even when the knowledge and experience in medicine had not been used by him for the purpose of earning the remuneration from his wife.

We, however, are unable to subscribe to the view that the Word, "qualification" should be confined to the qualification conferred by a University or its equivalent. The High Court of Bombay also did not confine the word "qualification" to the degree conferred by a University. It was observed by the Court in the course of the judgment that a person can be said to be in possession of requisite technical qualification when by virtue thereof he is eligible to perform that function. If the judgment is to be read as having laid down that qualification referred to in the section is one conferred by a University or like body, with respect, we are unable to subscribe to that view.

A statutory provision which is meant to be applied uniformity to all those governed by it needs to be interpreted in a manner which would enable all those governed by the provision to claim the benefits conferred by that provision to the extent to which they are eligible. When the words used in the provision are such that they are capable of being understood in a narrow or a liberal sense, the Court must prefer the liberal and wider interpretation so that a larger number can claim the benefits conferred by the provision as such an interpretation would have the merit of not only enabling all those who receive benefits of strict interpretation had been adopted, but others also to get the benefits. A beneficial provision must, unlike one levying penalties, be liberally construed.

The question referred to us is, therefore answered in favour of the assessee and against the Revenue. The assessee shall be entitled to costs in the sum of Rs.1,000.

M.B.A./365/FC??????????

Reference answered.