S.K. JaIn Vs. Deputy Commissioner of - Court Judgment

Excerpt:
1. in this appeal the assessee has listed four grounds in his appeal the only issue involved is the denial of assessee's claim of deduction under s. 80c of the it act amounting to rs. 24,392 out of total claim of rs. 29,300. we have heard the assessee's counsel as well as the learned departmental representative. the assessee's counsel has submitted that the requirement of provisions of s. 80c is that the contribution should be out of taxable income and it nowhere states that the taxable income should be of the same year in which the contribution has been made. he has further submitted that the past savings of the assessee, if proved to be out of taxable income of past years, have to be taken as taxable income for the purpose of s. 80c, and that contribution out of such past savings qualifies for deduction under s.80c. reverting to the facts of the case, the assessee's counsel submitted that the assessee was an employee of m/s jai prakash associates (p) ltd. where it was maintaining two accounts in his name-one account named as "personal a/c" and the other account named as "deposit account". referring to the assessee's personal account for the year ending 31st march, 1986-placed at p. 8 of the assessee's compilation, the assessee's counsel submitted that the contribution amounting to rs. 24,392.50 was made on 13th august, 1985, and before the date, there were credits in this account to the tune of rs. 24,000 which were the own account of the assessee's monthly salary and another credit of rs. 35,000 was as a result of transfer from the assessee's deposit account with m/s jai prakash associates (p) ltd. - copy placed at p. 3 of the assessee's compilation; in which there was balance of rs. 45,000 and current credit on account of interest to the tune of rs. 2,508. the brought forward balance of rs. 45,000 was out of taxable income for the previous years. in view of these facts, the assessee's counsel submitted that the contribution of rs. 24,392.50 made on 13th august, 1985, was out of assessee's taxable income and it was not relevant as to whether the assessee was maintaining two accounts with m/s jai prakash associates (p) ltd. or to which account that party debited the assessee's cheques. he, therefore, prayed for the allowance of the assessee's claim. the learned departmental representative, on the other hand supported the orders of the revenue authorities.2. in support of his submissions, the assessee's counsel has relied upon tribunal, allahabad's decisions in case of smt. rekha dixit ita no. 406(a)/1994, decided on 20th august, 1996, and of gyan prakash gaur, another co-employee of the assessee [ita no. 563(a)/1989, decided on 24th october, 1991] wherein, in similar facts and circumstances, the assessee's claim under s. 80c has been allowed.3. we have considered the rival submissions, facts and circumstances of the case as well as the tribunal's decision relied upon by the assessee and after careful consideration of the same are of the opinion that there is force in the submissions advanced by the assessee's counsel.in our opinion, the requirement of law for the deduction under s. 80c is that for qualifying the contribution as deduction under s. 80c, the contribution should be either out of current year's income chargeable to tax or out of past savings which have been accumulated out of income chargeable to tax in those past years and one to one corelation of the contribution with receipts on account of current year's income on the interpretation of the revenue that the contribution should be out of taxable income of the current year itself are foreign to the provisions. similarly, if the assessee is keeping its money in various accounts of different pockets of its shirt, at different places or in different boxes in house or in different bank accounts and makes contribution from one in which he has mixed the current year's receipts-mixes the current year's receipts with other, it cannot be said that the contribution having not been made from the account, pocket, place, box, or bank account in which the current year's receipts have been mixed, the contribution from one in which receipts were not mixed, is not out of income chargeable to tax.4. even, otherwise, for considering the deduction under s. 80c, what one is to see is the total income of the year and not the income till the date of contribution. if the total income of the assessee covers the contribution, then it is quite irrelevant as to from which account the assessee has made the contribution because law does not require that the assessee should make contribution from that very pocket in which he has placed the current year's income or the assessee should earn taxable income before the date of contribution. under the it act, the law has to be taken and considered at the end of the year. moreso, because the income is taxable on yearly basis and not on day-to-day basis.5. as far as assessee's case is concerned, we are of the opinion that there being credit to the tune of rs. 24,000 in the personal account and to the tune of rs. 2,508 in the deposit account wherefrom a sum of rs. 35,000 has been transferred to personal account, the total credit on account of current year's income by the time the contribution was made was at rs. 26,508, as against the contribution of rs. 24,392.50 which was quite sufficient to cover the contribution.6. in view of the above discussion, we are of the opinion that assessee was entitled to the deduction under s. 80c. consequently, we set aside the order of the cit(a) as well as of the ao on this point and direct the ao to allow the assessee's claim of deduction under s. 80c.

Judgment:
1. In this appeal the assessee has listed four grounds in his appeal the only issue involved is the denial of assessee's claim of deduction under s. 80C of the IT Act amounting to Rs. 24,392 out of total claim of Rs. 29,300. We have heard the assessee's counsel as well as the learned Departmental Representative. The assessee's counsel has submitted that the requirement of provisions of s. 80C is that the contribution should be out of taxable income and it nowhere states that the taxable income should be of the same year in which the contribution has been made. He has further submitted that the past savings of the assessee, if proved to be out of taxable income of past years, have to be taken as taxable income for the purpose of s. 80C, and that contribution out of such past savings qualifies for deduction under s.

80C. Reverting to the facts of the case, the assessee's counsel submitted that the assessee was an employee of M/s Jai Prakash Associates (P) Ltd. where it was maintaining two accounts in his name-one account named as "Personal a/c" and the other account named as "Deposit Account". Referring to the assessee's personal account for the year ending 31st March, 1986-placed at p. 8 of the assessee's compilation, the assessee's counsel submitted that the contribution amounting to Rs. 24,392.50 was made on 13th August, 1985, and before the date, there were credits in this account to the tune of Rs. 24,000 which were the own account of the assessee's monthly salary and another credit of Rs. 35,000 was as a result of transfer from the assessee's deposit account with M/s Jai Prakash Associates (P) Ltd. - copy placed at p. 3 of the assessee's compilation; in which there was balance of Rs. 45,000 and current credit on account of interest to the tune of Rs. 2,508. The brought forward balance of Rs. 45,000 was out of taxable income for the previous years. In view of these facts, the assessee's counsel submitted that the contribution of Rs. 24,392.50 made on 13th August, 1985, was out of assessee's taxable income and it was not relevant as to whether the assessee was maintaining two accounts with M/s Jai Prakash Associates (P) Ltd. or to which account that party debited the assessee's cheques. He, therefore, prayed for the allowance of the assessee's claim. The learned Departmental Representative, on the other hand supported the orders of the Revenue authorities.

2. In support of his submissions, the assessee's counsel has relied upon Tribunal, Allahabad's decisions in case of Smt. Rekha Dixit ITA No. 406(A)/1994, decided on 20th August, 1996, and of Gyan Prakash Gaur, Another co-employee of the assessee [ITA No. 563(A)/1989, decided on 24th October, 1991] wherein, in similar facts and circumstances, the assessee's claim under s. 80C has been allowed.

3. We have considered the rival submissions, facts and circumstances of the case as well as the Tribunal's decision relied upon by the assessee and after careful consideration of the same are of the opinion that there is force in the submissions advanced by the assessee's counsel.

In our opinion, the requirement of law for the deduction under s. 80C is that for qualifying the contribution as deduction under s. 80C, the contribution should be either out of current year's income chargeable to tax or out of past savings which have been accumulated out of income chargeable to tax in those past years and one to one corelation of the contribution with receipts on account of current year's income on the interpretation of the Revenue that the contribution should be out of taxable income of the current year itself are foreign to the provisions. Similarly, if the assessee is keeping its money in various accounts of different pockets of its shirt, at different places or in different boxes in house or in different bank accounts and makes contribution from one in which he has mixed the current year's receipts-mixes the current year's receipts with other, it cannot be said that the contribution having not been made from the account, pocket, place, box, or bank account in which the current year's receipts have been mixed, the contribution from one in which receipts were not mixed, is not out of income chargeable to tax.

4. Even, otherwise, for considering the deduction under s. 80C, what one is to see is the total income of the year and not the income till the date of contribution. If the total income of the assessee covers the contribution, then it is quite irrelevant as to from which account the assessee has made the contribution because law does not require that the assessee should make contribution from that very pocket in which he has placed the current year's income or the assessee should earn taxable income before the date of contribution. Under the IT Act, the law has to be taken and considered at the end of the year. Moreso, because the income is taxable on yearly basis and not on day-to-day basis.

5. As far as assessee's case is concerned, we are of the opinion that there being credit to the tune of Rs. 24,000 in the personal account and to the tune of Rs. 2,508 in the deposit account wherefrom a sum of Rs. 35,000 has been transferred to personal account, the total credit on account of current year's income by the time the contribution was made was at Rs. 26,508, as against the contribution of Rs. 24,392.50 which was quite sufficient to cover the contribution.

6. In view of the above discussion, we are of the opinion that assessee was entitled to the deduction under s. 80C. Consequently, we set aside the order of the CIT(A) as well as of the AO on this point and direct the AO to allow the assessee's claim of deduction under s. 80C.