2007 (4) TMI 61 - HC - Income Tax

Exemption - Assessee claim exemption u/s 10(22) of the ITA, 1961 on the ground that the income deemed to be chargeable to tax u/s 68 of the Act - Held that assessee entitle for exemption

Summary

Issues:
1. Interpretation of Section 10(22) of the Income Tax Act, 1961 regarding exemption for deemed income under Section 68.

Analysis:
The High Court of Delhi addressed the issue of whether an Assessee entitled to exemption under Section 10(22) of the Income Tax Act, 1961 can claim the benefit for income deemed chargeable under Section 68. The Assessing Officer contended that undisclosed income could not be exempted under Section 10(22), a view upheld by the Commissioner of Income Tax (Appeals). However, the Tribunal analyzed Sections 4, 5, 2(24), and 2(45) of the Act along with Section 10(22) and concluded that the term 'income' in Section 10(22) encompasses deemed income under Section 68.

The Court referred to a case where the Supreme Court interpreted a similar provision using the term 'derived from' and held it restrictively. However, since Section 10(22) lacks such restrictive language, the term 'income' must be given its natural or statutory meaning as per Section 2(24) of the Act. The Court emphasized that while exemption provisions should be strictly construed, once applicability is established, they must be liberally interpreted, citing various precedents to support this principle.

The Court reiterated that exemptions should be granted unless expressly denied by law. Relying on this principle and the liberal interpretation of exemption provisions, the Court found no flaw in the Tribunal's decision. Consequently, the Court dismissed the appeal, stating that no substantial question of law arose for consideration in this matter.