2002 (8) TMI 98 - HC - Income Tax

Court rules against double taxation, citing Income-tax Act sec 64(1)(ii) and R. Dalmia v. CIT precedent.

The court clarified the interpretation of section 64(1)(ii) of the Income-tax Act, emphasizing the prohibition of double taxation. The judgment ruled in ... Income, General Principles, Rule Against Double Taxation - 'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the salary income having already been assessed in the hands of the assessee's wife, Smt. Madhu Soni, under section 64(1)(ii) could not again be assessed in the hands of the assessee?' - the question referred is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. Issues:1. Interpretation of section 64(1)(ii) of the Income-tax Act, 1961 regarding the taxation of salary income.2. Whether the same salary income can be assessed in the hands of both the assessee and the assessee's wife.3. Application of the principle of double taxation in the present case.Analysis:1. The primary issue in this case revolves around the interpretation of section 64(1)(ii) of the Income-tax Act, 1961, concerning the taxation of salary income. The respondent-assessee, who owns shares in two companies along with his wife, received a salary from both companies. The assessee contended that the salary income should be taxed in his wife's hands due to her substantial interest in the companies. However, the Assessing Officer rejected this argument, leading to a dispute over the correct assessment of the salary income.2. The second issue pertains to whether the same salary income can be assessed in the hands of both the assessee and the assessee's wife. The Tribunal rejected the assessee's claim that the wife had a substantial interest in the companies and upheld the assessment of the salary income in the assessee's hands. The Tribunal, while acknowledging the previous assessment of the same income in the wife's hands, concluded that such income cannot be taxed again in the hands of the assessee.3. The final issue involves the application of the principle of double taxation in this case. The Revenue argued that even if the wife included the salary income in her return, the Revenue could still tax the same income in the hands of the assessee. However, the court disagreed, emphasizing that there is no provision for double taxation. Citing the case law of R. Dalmia v. CIT [1982] 133 ITR 169, the court affirmed that the same income cannot be taxed twice, thereby ruling in favor of the assessee and against the Revenue.In conclusion, the court's judgment clarified the interpretation of section 64(1)(ii) of the Income-tax Act, emphasized the prohibition of double taxation, and resolved the dispute by ruling in favor of the assessee.