Law:

Section:

Section 64(1)(ii) of the income-tax act, 1961-Transfer of assets-For benefit of spouse or minor child-Whether only net salary income of spouse after deduction under section 16(i) should be clubbed in hands of assessee under section 64(1)(ii) and not gross salary income-Held, yes Facts The assessee's wife was working as a whole-time director in a company of which he was the managing director. The ITO, while clubbing the income of the wife with that of the assessee did not allow standard deduction under section 16(7) in respect of the wife's salary. The Tribunal, however, confirmed the AAC's order allowing the assessee's appeal. On reference : Held If the wife herself had been the assessee, she would be entitled to the standard deduction and other expenses. There is no good reason why gross income should be clubbed with the income of her husband under section 64. It would be contrary to the scheme of the Act itself not to allow deductions before clubbing the income. Therefore, the Tribunal was justified. ORDER SHETTY, J. - The Tribunal, Bangalore Bench, has referred the following question in these two references under section 256(1) of the Income-tax Act, 1961 for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that only the net income of the spouse under salary after deduction under section 16(0 should be clubbed in the hands of the assessee under section 64(1)07) and not the gross salary Income ?" 2. The assessee is a Managing Director of Colorinks (P.) Ltd. and his wife, Smt. Shalini S. Nayak, has been working as a whole-time director in that company. She was paid remuneration by the assessee. The remuneration paid to her in the assessment year 1978-79 came to Rs. 13,231. The ITO did not allow deduction under section 16(i) of the Act in respect of the remuneration of the assessee's wife. He included the gross salary received by her in the total income of the assessee under section 64 of the Act. 3. The assessee preferred an appeal before the AAC, who accepted the appeal by…

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