Kerala High Court
Commissioner Of Income Tax vs Jobie K. John on 12 June, 2000
Equivalent citations: (2001)162CTR(KER)445
JUDGMENT S. Sankarasubban, J.
At the instance of the revenue , the following question of law has been referred under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), to this court:
"Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of the contribution made for purchase of National Saving Certificate even though the contribution has not come out of the income chargeable to tax in the previous year ?"
The issue raised in this case is with regard to the allowance of deduction under section 80C of the Act. An amount of Rs, 25,000 has been allowed to be deducted by the Tribunal. The assessing authority as well as the appellate authority refused to deduct the amount of Rs. 25,000 under section 80C of the Act on the ground that the purchase was not made out of the income earned during the previous year. When the assessee was asked to explain the source for an amount of Rs. 80,000 as cash balance as on 31-3-1984, as per the wealth statement filed and to file a cash flow statement his explanation was as follows ..
"Cash on hand of Rs. 80,000 as on 31-3-1984, stands reduced to Rs. 60,000. Part of this was utilised for the purchase of 15 cents of land. Cash on hand of Rs. 60,000 stands reduced to Rs. 40,000 as on 31-3-1986. Part of this was utilised for expenses and the National Saving Certificate was purchased from the income."
This explanation was interpreted by the department as amounting to say that the purchase has not come out of the income chargeable under the Act. The Tribunal considered the matter as follows :
"Sec. 80C allows deduction for any sum paid in the previous year by the assessee out of his income chargeable to tax. This does not mean that the sum should have been paid out of the income chargeable to tax in the previous year. The payment can also be made from out of the savings of the income in the preceding year, which was chargeable to tax. The assessee's explanation is that it had utilised the cash balance partly for the purchase of lands and had utilised the income for purchase of National Saving Certificate. Apart from the savings of the income of the preceding years, the income of the previous year in an extent of Rs. 30,750 which is more than the amount invested in National Saving Certificate. Therefore, from any point of view, the assessee is bound to succeed. Accordingly, we direct the Income Tax Officer to grant deduction under section 80C subject to the limits prescribed therein."
2. Learned counsel for the revenue submitted that the view of the Tribunal that the payment can also be made out of the savings of the income in the preceding year to get exemption under section 80C of the Act is not correct. Learned counsel submitted that section 80C itself says that the payment should be made out of the income chargeable to tax, then only the exemption will be obtained. Learned counsel brought to our notice a Division Bench decision of this court in CIT v. Abraham George (2000) 14 DTC 314 (Ker-HC) : (2000) 242 ITR 171 (Ker). Arijit Pasayat, C.J. speaking for the Bench observed as follows :
"The clear language used in the provision is "any sums paid in the previous year by the assessee out of his income chargeable to tax". Obviously, the deduction in terms of section 80C can be granted if the payment is made out of his "income chargeable to tax".
Their Lordships further held as follows :
"The exemption granted is from charging the said sums to tax. The question of exempting any sum from being charged to tax arises only when that sum could or would possibly enter the field of that particular taxation. The payment in the case at hand undisputedly was not made out of the income chargeable to tax. That being the position, the Tribunal was not justified in holding that even if the contribution did not come out of the income chargeable to tax, it was yet allowable as a deduction."
Their Lordships followed the decision of the Orissa High Court in CIT v. Dr. Usharani Panda (1995) 212 ITR 119 (Ori).
3. Learned counsel for the respondent - assessee submitted that, as a matter of fact, in this case the Tribunal has found that the source for purchase has come from the income of the previous year and hence, the question of law actually does not arise in the facts of this case.
4. After hearing counsel on both sides, we are of the view that as a matter of fact, the question does not arise for consideration in this case. The Tribunal has not allowed the appeal on the ground that even if the contributions are not from the income from the previous year, deduction can be allowed. On the other hand, the Tribunal considered the explanation of the assessee that the National Saving Certificate is purchased from the income, that the assessee had an income of Rs. 30,750 which is more than the amount invested in National Saving Certificate and held that the assessee is bound to succeed from any point of view. This view taken by the Tribunal cannot be characterised as unreasonable or perverse. The assessee has clearly stated that the National Saving Certificate was purchased from the income and admittedly he had an income of Rs. 30,750 which is more than the amount invested in National Saving Certificate. We are in agreement with the view taken by the Tribunal that the assessee purchased the National Saving Certificate from out of the income of the previous year.
In this view of the matter, the question raised by the Tribunal does not arise. We accordingly decline to answer the question. The Income Tax Reference is disposed of as above.