Income Tax Appellate Tribunal - Madras
K.S.D. Rajendran vs Income-Tax Officer on 14 January, 1991
Equivalent citations: [1991]37ITD22(MAD)
ORDER
T.V. Rajagopala Rao, Judicial Member
1. The assesses in the first two appeals is an individual and in the third appeal, the assessee is an HUF. There is a common point involved in all these appeals and hence they can be taken up together and disposed of by a common order.
2. The first of the appeals arise out of the Section 154 order passed by the ITO whereas the other two appeals arise out of the regular assessment orders passed under Section 143(3). The common question which arises for consideration in all these three appeals is whether the accrued interest on the National Savings Certificates (V Issue) held by the assessee as on the last date of the previous years relevant to the respect assessment years under consideration is exempt from income-tax under Section 10(15)(it) of the IT Act. The amount involved for the assessment year 1981-82 (in ITA No. 2473/Mds/88) is Rs. 24,500. Similarly, the amount involved in ITA No. 2476/Mds/88 (Assessment year 1982-83) is Rs. 24,500 whereas the amount involved in ITA No. 2475/Mds/88 is Rs. 11,400. It is the contention of the assessee that no notification from the Government exempting the interest accrued on NSC (V Issue) is required before claiming exemption. The argument of the assessee's counsel is that the interest accrued on enumerated investments given out in the section does not require any notification from the Central Government. Section 10(15)(n) as applicable for the assessment years 1981-82 and 1982-83 is the following :-
10(15)(ii). Interest on Treasury Savings Deposit Certificates, Post Office National Savings Certificates, National Plan Certificates, Twelve Year National Plan Savings Certificates and such other certificates issued by the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf, interest on deposits in Post Office Savings Banks and bonus in respect of deposits under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, to the extent to which the amounts of such certificates or deposits do not exceed in each case the maximum amount which is permitted to be invested or deposited therein:
(Proviso not extracted since it is not applicable).
The argument of the learned counsel for the assessee is that the Government notification in the Official Gazette will be required only to categories of investments which come under "such other certificates" issued by the Central Government but does not govern enumerated categories of investments, preceding the words "and such other certificates issued by the Central Government". It is further argued that since the Post Office National Savings Certificate is an enumerated category of investment mentioned in that sub-section, before granting exemption no notification of the Central Government will be shown or required. We are unable to agree with this contention of the learned counsel and we are of the view that certain enumerated categories of investments together with unremunerated categories of investments were also included in the sweep of the section and all those categories, whether enumerated or not, according to the correct interpretation of the section require notification from the Central Government before the interest on them can be claimed as exempt. It is significant to note that the enumerated categories of investments were treated similar to the unremunerated categories, since the conjunction used was "and". In any view of the matter, we are of the view that the accrued interest on the National Savings Certificates (V Issue) cannot be claimed as exempt from income-tax. The National Savings Certificates (V Issue) Rules, 1973, were framed by the Central Government by virtue of the powers conferred on it under Section 12 of the Government Savings Certificates Act, 1959 (46 of 1959). The rules thus framed were published in Notification No. GSR 42 3 (E), dated September 6,1973. They came into force from Is January, 1974. Rule 27 of the said rules is as follows :--
27. Income-tax-Interest on these certificates will be liable to tax under the Income-lax Act, 1961 (43 of 1961), but no tax will be deducted at the time of payment of the discharge value of the certificate.
In view of the clear wording of the rule, the assessee should be deemed to have purchased the National Savings Certificates (V Issue) with an open mind and knowing fully that the accrued interest thereon is not exempt from income-tax. Therefore, when there is a specific provision under which it is stated that the specified investments made by the assessee are not entitled to income-tax exemption, we are unable to see how the assessee can claim such an exemption under the IT Act. In view of the specific provision in the National Savings Certificates (V Issue) Rules, 1973, our interpretation of Section 10(15)07) gets added strength and appears to be more probable and correct than the interpretation opposite to it. In the result, we hold that the assessee is not entitled to the exemption prayed for. Consequently, we hold that the Section 154 order passed for the assessment year 1981-82 is clearly justified and we further hold that the disallowance of Rs. 24,500 for the assessment years 1981-82 and 1982-83 in the individual assessments and disallowance of Rs. 11,400 in the HUF assessment are correct and cannot be called in question.
3. In ITA No. 2475/Mds/88, there is another point which remains to be disposed of. It is the case of the assessee that the old constructions standing at Door Nos. 14A, 17 and 17A, Palace Road, Ramanathapuram, were completely demolished and in their place a new construction was put up and hence the assessee is entitled to relief under Section 23(1 )(c). The ITO denied the relief on the sole ground that the assessee carried out only some repairs to the old buildings and did not construct any new building. The disallowance was confirmed by the Dy. Commissioner (Appeals), A-Range, Madurai. At the time of arguments, it is clearly admitted that though new buildings were constructed, they were all shops and not residential building. Section 23(1 )(c) speaks of residential houses and not non-residential properties and in view of the admission made before us during the course of hearing, we hold that the relief is correctly denied to the assessee by the lower authorities.
4. Since both the points fail in the appeal for the assessment year 1982-83, in which the assessee-HUF is the appellant, ITA No. 2475/Mds/88 is dismissed. Since the single point involved is held against the assessee in ITA Nos. 2473 and 2476/Mds/ 88, they are dismissed.