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of <h1>High Court: Income from business, shares, interest assessed for 'body of individuals'. Dividends split. MD's pay assessed individually.</h1> <h3>Commissioner Of Income-Tax Versus Modu Timblo</h3> Commissioner Of Income-Tax Versus Modu Timblo - [1994] 206 ITR 647, 116 CTR 442, 70 TAXMANN 585 Issues Involved:1. Assessability of income from business, share income from partnership firms, and interest earned on bank accounts.2. Assessability of dividend income received by the communion of interest of husband and wife married under the Portuguese Civil Code.3. Assessability of managing director's remuneration and perquisites.Summary:Issue 1: Assessability of Income from Business, Share Income from Partnership Firms, and Interest Earned on Bank AccountsThe Tribunal held that income from business, share income from partnership firms, and interest earned on bank accounts should be assessed in the hands of the 'body of individuals' (BOI) consisting of the husband and wife. The High Court affirmed this, stating that the communion of husband and wife under the Portuguese Civil Code constitutes a BOI for the purposes of the Income-tax Act. However, the High Court clarified that interest earned on bank accounts should be assessed in the hands of the respective co-owners on whose investment such interest has been received.Issue 2: Assessability of Dividend IncomeThe Tribunal held that dividend income received by the communion of interest of husband and wife married under the Portuguese Civil Code should be assessed in equal shares in the hands of each consort without taxing it in the hands of the BOI. The High Court upheld this decision, affirming that dividend income should be divided equally and assessed separately in the hands of the husband and wife.Issue 3: Assessability of Managing Director's Remuneration and PerquisitesThe Tribunal held that the entire managing director's remuneration and perquisites should be assessed in the hands of Mr. Modu Timblo, individually, and not one-half of the same. The High Court agreed, stating that salary income, including remuneration as a managing director, is the income of the individual who earns it and should be assessed solely in their hands.Conclusion:1. Income from business and share income from partnership firms should be assessed in the hands of the BOI, but interest earned on bank accounts should be assessed in the hands of the respective co-owners.2. Dividend income should be assessed equally in the hands of each consort.3. Managing director's remuneration and perquisites should be assessed in the hands of the individual earning them.
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