- (1.) BY this reference under section 256 (1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question of law at the instance of the Revenue, to this court for the opinion : "whether, on the fact and in the circumstances of the case, the Appellate Tribunal is right in upholding the contention of the assessee that the income-tax assessment made on the disrupted body of individuals as a result of death of member is unauthorised and therefore invalid?"
(2.) THE assessees in this case are Shri and Smt. Jose Filipe Alvares of Margao. Both of them are husband and wife governed by the system of community of property (known under the Portuguese Civil Code of 1860 as "communiao Dos Bens") in force in the State of Goa and in the Union Territories of Dadra and Nagar Haveli and Daman and Diu. The controversy in this reference pertains to the assessment for the assessment year 1974-75 the corresponding accounting year being the financial year ended March 31, 1974. For this assessment year, the Income-tax Officer made the assessment of their income on March 26, 1977, in the status of "body of individuals". This order of the Income-tax Officer was challenged before the Appellate Assistant Commissioner on the ground that one of the members of the body of individuals having expired on February 7, 1975, there was no body of individuals in existence on the date of assessment and hence, assessment on the body of individuals was invalid. The contention of the assessee was rejected by the Appellate Assistant Commissioner. The assessee went in further appeal to the Tribunal. The Tribunal decided in favour of the assessee and held that the assessment made on the dissolved body of individuals was not valid. The Tribunal observed that the case of husband and wife governed by the Portuguese Civil Code was not analogous to that of the Hindu undivided family. It, therefore, held the assessment on the body of individuals to be invalid. Hence, this reference at the instance of the Revenue.
(3.) WE have heard learned counsel for the Revenue. The law with regard to assessment of income of the husband and wife governed by the system of community property under the Portuguese Civil Code of 1860 in force in the State of Goa has undergone a complete change by the insertion of section 5a in the Income-tax Act, 1961, by the Finance Act of 1994, with retrospective effect from April 1, 1963. This section now provides that in the case of such husband and wife, the income of the husband and of the wife under any head of income would not be assessed as such community of property (whether treated as an association of persons or a body of individuals), but such income of the husband and of the wife under each head of income (other than under the head "salaries") shall be apportioned equally between the husband and the wife and the income so apportioned shall be included separately in the total income of the husband and of the wife, respectively, and the remaining provisions of this Act shall apply accordingly. Section 5a reads : "5a. Apportionment of income between spouses governed by the Portuguese Civil Code.- (1) Where the husband and wife are governed by the system of community of property (known under the Portuguese Civil Code of 1860 as 'communiao Dos Bens') in force in the State of Goa and in the Union Territories of Dadra and Nagar Haveli and Daman and Diu, the income of the husband and of the wife under any head of income shall not be assessed as that of such community of property (whether treated as an association of persons or a body individuals), but such income of the husband and of the wife under each head of income (other than under the head 'salaries') shall be apportioned equally between the husband and the wife and the income so apportioned shall be included separately in the total income of the husband and of the wife, respectively, and the remaining provisions of this Act shall apply accordingly. (2) Where the husband or, as the case may be, the wife governed by the aforesaid system of community of property has any income under the head 'salaries', such income shall be included in the total income of the spouse who has actually earned it. ";