Income Tax Appellate Tribunal - Ahmedabad
Dineshchandra Vig vs Income-Tax Officer on 1 May, 1991
Equivalent citations: [1991]39ITD1(AHD)
ORDER
R.L. Sangani, Judicial Member
1. This appeal by the assessee relates to assessment year 1986-87.
2. The assessee had income from salary amounting to Rs. 69,217. The assessee had purchased National Saving Certificates of Rs. 35,000. From the entries in bank passbook, the ITO came to the conclusion that National Saving Certificates of Rs. 20,000 had been purchased from the Provident Fund amount received by the assessee on leaving the job from Calico Mill which had been credited to his account in the passbook and that National Saving Certificates of the balance amount of Rs. 15,000 had been purchased out of the amount received on maturity of CTD 10 years in respect of which Rs. 33,000 had been credited in the pass-book of the assessee. The certificate of Rs. 20,000 have been purchased on 13-2-1986 and those of Rs. 15,000 have been purchased on 18-4-1985. According to the ITO the assessee had invested amount of Rs. 35,000 out of the Provident Fund amount and CTD amount received by him. According to him deduction under Section 80C could be claimed only if the investments in question had been made out of the income chargeable to tax and that the Provident Fund amount and CTD amount received by the assessee did not represent amount chargeable to tax either in the current year or in the earlier year and hence, deduction under Section 80CC was not available. He declined to grant deduction under the said provision.
3. Before the AAC the submission of the assessee was that the amount received by the assessee by way of PF and CTD amount was out of the amounts chargeable to tax in the earlier years and as such, when investments were made in National Saving Certificates from these amounts condition for allowability of deduction under Section 80C was satisfied. Reliance was placed on the decision of the Supreme Court in Chandulal Harjiwandas v. CIT [1967] 63 ITR 627. The AAC observed that the expression "out of his income chargeable to tax" indicated that the income from which investments are required to be made under Section 80C should be the income of the relevant accounting year and not the income of the earlier years and as such since the investments in present case were made out of the PF amount and CTD amount which represented the income of the earlier years, deduction under Section 80C was not allowable. An alternate submission was raised before the AAC to the effect that in the bank account salary amounts as well as other amounts were deposited and when investments are made from such bank account, it could not be said that the investments had been made out of the PF amount and CTD amount deposited in the account and not out of the salary amount. The learned AAC observed in respect of his ultimate submission that the first instalment of Rs. 15,000 had been made at the very beginning of the assessment year and as such, the said investment could not be attributed to the income of the relevant accounting year and as such, deduction under Section 80C would not be allowable in respect of that investment. As regards the balance of Rs. 20,000 he held that prior to the deposit of PF amount the assessee had enough balance in his bank account and investment could be attributed to the amount which was in deposit in the bank account prior to the deposit of the PF amount and as such, deduction under Section 80CCA was allowable in respect of the said investment of Rs. 20,000. He, accordingly, confirmed the disallowance of deduction under Section 80C in respect of investment of Rs. 15,000. The assessee is now in appeal before the Tribunal.
4. The point to be decided is whether the AAC was right in law in holding that in order to claim deduction under Section 80C of the Act, the investment amount specified in the said provision should have been made out of the income chargeable to tax of the relevant previous year only and that such deduction was not allowable if the investment was made out of the income chargeable to earlier years.
5. It is to be noted that as far as the ITO was concerned he has held that the investment in question could be made out of the income chargeable to tax in the relevant previous year or out of income chargeable to tax of the earlier previous years. The view taken by the AAC is different from the view taken by the ITO. The learned counsel for the assessee submitted that the view taken by the AAC was erroneous while the learned D.R. has supported the view taken by AAC. I find that the view expressed by the AAC cannot be sustained. There is direct decision of the Punjab & Haryana High Court on this point which is reportcd.in Ravi Kumar Mehra v. C/r [1988] 172 ITR 108. The High Court observed that an assessee was entitled to make payment towards life insurance premia.out of funds in his savings bank account where the balance to his credit is available before the commencement of the accounting year in order to claim deduction under Section 80C of the Act. The same principle would apply for investments in National Saving Certificates, because the language is identical. In Section 80C, the words mentioned are "any sums paid in the previous year by the assessee out of his income chargeable to tax". The intention underlying this provision is to encourage the assessees in making investment in specified securities. The very purpose would be frustrated if it is held that such investment could be made only after the assessee earned income chargeable to tax in that year. If such interpretation is made, it would mean that an assessee could make investment only after earning income of the relevant year and not at any time during the relevant year. Such interpretation would frustrate the very purpose underlying Section 80CCA. An assessee maintains joint fund in which savings of the past years are accumulated, and in which savings of the current year are also introduced, the investments made out of such funds would be eligible for deduction under Section 80C. The ITO has disallowed the claim on the ground that in the bank account, the amounts received by way of PF and maturity amount of CTD had been deposited. When the account maintained by the assessee in the bank comprises of several deposits, including deposits from income earned by the assessee and when investments are made out of the funds of the joint account, the Department would not be entitled to say that particular amount did not represent income chargeable to tax. Considering the entire circumstances, I hold that in the present case, AAC was not justified in confirming the disallowance of deduction in respect of investment of Rs. 15,000 made by the assessee from funds to his credit in the bank account particularly when his income chargeable to tax during the year amounted to Rs. 69,217.I, accordingly, direct the ITO to allow deduction in respect of investment of Rs. 15,000 under Section 80C of the Act.
6. The appeal is allowed.