Income Tax Appellate Tribunal - Jodhpur
Income Tax Officer vs Manmohan Krishna Gupta on 10 November, 2000
Equivalent citations: (2003)78TTJ(JODH)578
ORDER
P.M. Jagtap, A.M.
1. This appeal is preferred by the Revenue against the order of Dy. CIT(A), Jodhpur, dt. 19th Aug., 1994.
2. The only ground taken by the Revenue in this appeal reads as under :
"On the facts and circumstances of the case the learned Dy. CIT(A) has erred in directing the AO to allow rebate Under Section 88 on the investments of Rs. 19,000 which have not been made by the assessee out of his current year's income chargeable to tax."
3. In this case, the assessee deriving income from salary and interest, invested a sum of Rs. 34,000 in PPF a/c and claimed the rebate Under Section 88 on the said investment together with other eligible investments. During the course of the assessment proceedings, it was noticed by the AO that the investment in PPF a/c amounting to Rs. 19,000 was made by the assessee on 3rd April, 1991. It was considered by the AO that this investment of Rs. 19,000 was not made by the assessee out of his income chargeable to tax in the relevant previous year and accordingly the rebate under Section 88 on the said amount was not allowed to the assessee. The matter was carried before the Dy. CIT(A) who allowed the claim of the assessee following the decision of Hon'ble High Court of Punjab and Haryana in the case of Ravi Kumar Mehra v. CIT (1988) 172 ITR 108 (P&H). Aggrieved by the same, the Revenue is in appeal before us.
4. The learned Departmental Representative, at the outset, submitted that the issue involved in this appeal is squarely covered in favour of the Revenue and against the assessee by the decision of Hon'ble Orissa High Court in the case of CIT v. Dr. Usha Rani Panda (1995) 212 ITR 119 (On), a copy of which is also placed on record by the learned Departmental Representative. Nobody appeared on behalf of the assessee. However, a written submission furnished by the assessee is placed on record in which the assessee has mainly relied on the decision of first appellate authority and it has also been submitted that the requirement of Section 88 is only that the investment should be out of income chargeable to tax and it does not qualify that the same has to be made only out of current year's income.
5. We have heard the learned Departmental Representative and also considered the written submissions furnished by the assessee. We have also perused the relevant material available on record including the decision of Hon'ble Orissa High Court in the case of CIT v. Dr. Usha Rani Panda (supra) cited by the learned Departmental Representative wherein the Hon'ble Orissa High Court has observed and held as under ;
"On examining the aforesaid section, the only conclusion that can be arrived is that an individual if he has paid any sum in the previous year out of his income chargeable to tax, then only the deduction under Section 80C can be claimed. If the same has been paid out of an income which is not chargeable in the previous year, then the deduction claimed cannot be allowed. The Tribunal was wholly in error in coming to the conclusion that there is no nexus between the investment made for the purpose of Section 80C with the income earned by the assessee. In our considered opinion, until and unless it is established that the sum paid in the previous year is out of a chargeable income of the assessee during the previous year, the deduction is not allowable. Accordingly, we answer the question posed by holding that the Tribunal was not justified in holding that the claim of deduction under Section 80C was available though there was no nexus of the investment with the income chargeable to tax shown by the assessee. The answer is in favour of the Revenue and against the assessee."
6. It is observed that the learned Dy. CIT(A) in this case allowed the claim of the assessee for rebate under Section 88 following the ratio laid down by the Hon'ble Punjab and Haryana High Court in the case of Ravi Kumar Mehra v. CIT (supra) wherein the Hon'ble High Court rendered its decision on the issue of deduction under Section 80C which was analogous to Section 88. The relevant observations of the Hon'ble High Court of Punjab and Haryana are reproduced below :
"The fact that the payment of life insurance premia was made by the assessee out of the amount lying to its credit in the personal account with the company which was formed on 1st July, 1972, is not at all a relevant factor and ought not to have weighed with the Revenue for disallowing the deduction under Section 80C(1). By making payment of the life insurance premia by withdrawing the amount from its personal account with the said company, the credit balance of the assessee in the said account was correspondingly reduced. This in clear terms means that the income of the assessee after giving deduction of life insurance premia under Section 80C(1) would also be correspondingly reduced. The reason advanced by the Tribunal that since the amount of Rs. 6,304 had come out of the assessee's account with the company from which no taxable income was derived, deduction of this amount cannot be allowed under Section 80C(1) is not correct. An assessee may make payment of the life insurance premia out of his savings a/c with a bank where the balance to his credit is available before the commencement of the accounting year. This would in no case mean that the payment of premia so made is not to be deducted out of the total income of the assessee in the relevant accounting year and the corresponding assessment year. Such a construction on Section 80C would not be proper nor is it intended by the provisions of Section 80C(1) of the Act."
7. It is pertinent to note here that there was no representation from the assessee's side in the case of CIT v. Dr. Usha Rani Panda (supra) and the aforesaid decision of Hon'ble Punjab & Haryana High Court was not brought to the notice of the Hon'ble Orissa High Court. It is observed that the view taken by the Hon'ble High Court of Punjab & Haryana in the case of Ravi Kumar Mehra (supra) was reiterated by the said Court again in the case of Madanlal Mehra (HUF) v. CIT (1991) 192 ITR 486 (P&H) and the ratio of these decisions has been applied by the authorities below including this Tribunal in various cases involving the similar issue. It is also observed that the decision of Hon'ble Orissa High Court in the case of Dr. Usha Rani Panda (supra) has also been relied upon by the Hon'ble Kerala High Court recently in the case of CIT v. Abraham George (2000) 242 ITR 171 (Ker). Thus, the contradiction in the decision of Hon'ble High Courts on this issue still prevails and there being no decision of Hon'ble jurisdictional High Court or the Hon'ble apex Court, we have to follow the one which is favourable to the assessee as per the settled position of law.
8. It is observed that the similar issue came up for consideration before this Tribunal in the case of B.K. Mathur v. ITO in ITA No. 259/Jp/94 and the then learned AM, sitting in SMC, decided the issue in favour of the assessee following the decision of Hon'ble Punjab and Haryana High Court in the case of Ravi Kumar Mehra (supra) and further made certain observations as given below :
"If the income chargeable to tax in a particular year adequately covers the amount of investment made in eligible investments qualifying for deduction under Section 80C, 80CC or 80CCA, there is no justification for denial of such deductions claimed by the assessee."
In our humble opinion with due regards to the views expressed by the different High Courts, the aforesaid observations of this Tribunal are quite comprehensive having inherent force of supplementing the different views expressed by the High Courts on this issue.
9. Sections 80C, 80CC, 80CCA as well as Section 88 refer to "investment/payment made by the assessee in the previous year out of income chargeable to tax" and considering the phraseology used in these sections, it is apparent that the reference of the term 'previous year' is relevant to the making of investment and the clear pointer is that such investment/repayment should have been made in the relevant previous year. Subsequent mention of 'income chargeable to tax' specifically connotes that such investment or payment is to be made out of income chargeable to tax without correlating the same to the relevant previous year. The scope of the term 'income chargeable to tax' is wide enough to include the income of the earlier year(s) also and the only requirement is that such sum should form part of assessee's income chargeable to tax. Such interpretation would certainly fortify the object of enacting the relevant sections to encourage the thrift.
10. It has been held by the Hon'ble High Court of Orissa in the case of CIT v. Dr. Usha Rani Panda (supra) that unless and until it is established that the sum paid in the relevant previous year is out of chargeable income of the assessee during that previous year, the deduction is not allowable. Even if this view is to be concurred, we are of the opinion that in order to establish that the investment/payment is made out of chargeable income of the relevant previous year, one has to consider the overall fund flow position of the assessee for that previous year so as to arrive at the correct conclusion and the nexus of each and every entry in respect of investment/payment need not be established. The observations of the Hon'ble Orissa High Court in the case of CIT v. N. Benugopal Choudhary (1991) 187 ITR 614 (Ori) being supportive to our views are reproduced below :
"It is normal human behaviours in an individual's private life that all sources are amalgamated and spent. We can safely draw the conclusion that the assessee who is a salaried person was putting amounts received by him to the common fund. It cannot be ruled out that the money received from fixed deposits was being spent by him and money received from salaries was invested in National Saving Certificates."
Even if it is assumed that such investment or payment has to be made out of assessee's income chargeable to tax during the previous year in order to avail of the desired benefit, the same need to be established by looking into the overall financial position of the entire previous year as indicated above and in our view the best and easiest method for the same is to ascertain that the income of the relevant previous year is sufficient so as to cover up all such eligible investments.
11. It is observed that the Jaipur Bench of Tribunal while considering the similar issue in the case of M.C. Bhandari v. ITO 24 Tax World 283 (Jp) has discussed the relevant judicial pronouncements at length and its ultimate findings given therein also support our views.
12. As such considering all the facts of the case and in view of our findings given hereinabove, after due consideration of relevant judicial pronouncements we are of the view that the Dy. CIT(A) has rightly allowed the rebate under Section 88 on investment of Rs. 19,000 made in PPF on 3rd April, 1991, and his impugned order on this issue is, therefore, upheld.
13. In the result the appeal of the Revenue is dismissed.