1981 (6) TMI 51 - AT - Income Tax

Tribunal recognizes experience as technical qualification under Income Tax Act

The Tribunal held that experience could qualify as a technical qualification under section 64(1)(ii) of the Income Tax Act, especially in the absence of ... - Issues:1. Whether the salary paid to the assessee's husband can be excluded from the assessee's income under section 64(1)(ii) of the Income Tax Act.Detailed Analysis:The appeals before the Appellate Tribunal ITAT CALCUTTA-C involved the question of whether the salary paid to the assessee's husband could be excluded from the assessee's income by applying the provisions of section 64(1)(ii) of the Income Tax Act for the assessment years 1976-77 and 1977-78. The assessee, engaged in the business of manufacturing coir mats and mattings with sales to foreign countries, claimed that the significant turnover and profit were achieved due to the expertise of her husband, who received a salary and bonus. The Income Tax Officer (ITO) included the husband's salary in the assessee's income, stating that section 64(1)(ii) applied only if the husband possessed technical or professional qualifications, which he did not. However, the ITO acknowledged the husband's experience and his contribution to the business's success.The matter was appealed, and the Appellate Assistant Commissioner (AAC) held that the exceptions in the proviso to section 64(1)(ii) applied in this case. The AAC considered a certificate from the Coir Board, stating the husband's technical expertise and experience in the trade, as a crucial factor. The AAC concluded that the husband's knowledge and experience should be considered as a technical qualification, even without formal technical or professional qualifications, as there were no statutory qualifications for the business. The Revenue appealed, arguing that technical or professional qualification required a certificate, degree, or diploma from a competent authority, which the husband lacked. The AAC's admission of the Coir Board's certificate as new evidence without allowing the ITO to comment was criticized.The Tribunal opined that technical or professional qualification in section 64(1)(ii) should encompass experience gained over years in a trade, especially when no statutory qualifications exist. The Tribunal highlighted that the Coir Board's certification of the husband's expertise was crucial. The Tribunal compared the situation to the tea business, where experience could be a qualification even without formal certification. However, the Tribunal noted a flaw in the AAC's decision for not following procedural rules, specifically rule 46A of the IT Rules, by admitting new evidence without the ITO's input. Consequently, the Tribunal set aside the order and directed the AAC to reconsider the appeals while complying with rule 46A.In conclusion, the Tribunal emphasized that experience could be considered a qualification, especially when no statutory qualifications exist, and highlighted the importance of following procedural rules in admitting new evidence. The case was remanded to the AAC for fresh consideration in compliance with the IT Rules.