Rajasekhara Murthy, J.
1.The following question has been referred by the Income-tax Appellate Tribunal, Bangalore Bench, under s. 256(1) of the I.T. Act, 1961, for the opinion of this court :
'Whether the Income-tax Appellate Tribunal is correct in deciding that technical or professional qualification involves a university degree in Engineering Medicine or Law, etc., or membership of recognized profession societies like the Institutes of Chartered Accountants, and the plain experience in any field in itself cannot be treated as a technical or professional qualification within the meaning of the proviso to section 65(1)(ii) of the Income-tax Act, 1961 ?'
2. The assessee was getting salary as managing director of M/s. Gopal Films since 1964. His wife, Smt. Indira, became a partner in the said firm in the year 1969. The assessee was paid salary as the managing director of the firm. The ITO included in the assessment of Shri D. Rajagopal, the husband, the salary which he was drawing as managing director. The assessee claimed that the salary received by him from the firm should be excluded from his assessment under s. 64(1)(ii) of the Act and should be included and assessed in the hands of his wife. The ITO rejected the said contention and included the salary income from the firm in his assessment as individual.
3. Being aggrieved by the said order, the assessee preferred an appeal before the AAC. The AAC dismissed the appeal and upheld the assessment. The assessee went up in further appeal before the Tribunal.
4. The Tribunal noticed that the assessee did not possess any technical or professional qualification within the meaning of the proviso to s. 64(1)(ii) of the Act and the assessee was only a graduate. The Tribunal held that the salary income of the assessee should be excluded from the assessment of the assessee and included it with the income of the spouse who was a partner in the said firm. The Tribunal also held that the assessee's wife had substantial interest in the firm being a 20% shareholder.
5. The question is whether the Tribunal is justified in directing exclusion of the salary income of the assessee in his assessment for the relevant year under s. 64(1)(ii) of the Act.
6. Section 64(1)(ii) provides for exclusion of any remuneration received by a spouse from the concern in which the individual has substantial interest. The only exemption stated in the proviso thereunder is the income derived by a spouse possessing technical or professional qualification and such income should be solely attributable to the application of his or her technical or professional knowledge and experience.
Section 64(1)(ii) is set out hereunder :
'(1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly - ....
(ii) to the spouse of such individual by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual has a substantial interest :
Provided that nothing in this clause shall apply in relation to any income arising to the spouse where the spouse possesses technical or professional qualification and the income is solely attributable to the application of his or her technical or professional knowledge and experience.'
7. The proviso is an exception to clause (ii). It must, therefore, be strictly construed. The proviso contemplates two conditions : (1) the spouse must possess technical or professional qualification; and (2) the income derived by him or her must be attributable to the application of the such technical or professional knowledge an exprience. The requirement of technical or professional qualification is not general in terms. It must related to the post which he or she occupies and, secondly, the salary or fees must be attributable to the application for his or her technical or professional knowledge. Both these conditions must be satisfied for excluding salary drawn by an assessee in his/her assessment, and to assess it separately in the individual assessment of the recipient.
8. Having regard to the nature of the business in which the assessee is employed and a mere degree qualification which he possesses cannot, in the context, be considered as professional or technical qualification and the experience gained in that business shall not be referable to the qualification which he possesses. In this case, the assessee was just a graduate. He was receiving salary as the managing director of the concern in which his wife had substantial interest. His salary cannot, therefore, be taxed in his hands ignoring the provisions s. 64(1)(ii). The Tribunal was, therefore, justified in excluding the income of the assessee from his assessment and directing it to be assessed in the hands of his spouse.
9. The question referred is not properly framed. The real question is whether salary drawn by the assessee in the firm in which his wife is a partner and holds substantial interest, should be assessed in his hands or should be aggregate with the income of his wife spouse in her assessment.
The question is therefore, reformed as follows :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in reversing the Appellate Assistant Commissioner's order and directing that the salary of the assessee from the firm of M/s Gopal films should be assessed in the hands of his spouse who is a partner in the firm ?'
The question as reframed is answered in the affirmative and against the Revenue.