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Issues:
- Interpretation of Section 80C of the Income Tax Act regarding deduction on National Savings Certificate investment. Analysis: The appeal was filed by the Department against the order of the AAC related to the assessment year 1985-86, specifically challenging the allowance of deduction under Section 80C for National Savings Certificate (NSC) investment. The assessee, an individual deriving income from salary, received a maturity value from a Life Insurance Policy and invested a portion in NSC. The ITO rejected the claim for the full amount, allowing deduction only on the portion invested from salary income. The AAC, however, allowed the deduction on the entire NSC investment, emphasizing that the source of funds need not be from the same year's income. He highlighted that as long as the total earnings of the previous year covered the investment, the assessee was entitled to the relief under Section 80C. The Department's representative argued that as per Section 80C(2)(e)(i), the sums qualifying for relief must come from income chargeable to tax. Referring to the definition of 'total income' and the specific provisions of the Act, he contended that the maturity amount from LIC did not represent taxable income for the relevant year. On the contrary, the assessee's representative supported the AAC's decision, emphasizing the provision's intent to encourage savings, irrespective of the income source for investments. The Tribunal analyzed the contentions, noting that while Section 80C requires the sum to be paid out of income chargeable to tax, it does not mandate it to be from the same year's income. The Tribunal cited legal precedents emphasizing the plain language of the statute and the onus on the assessee to prove entitlement to relief. The Tribunal concluded that the amount from the LIC maturity did not qualify as income chargeable to tax, as it was not received periodically or regularly from a definite source. The language of Section 80C was deemed clear, leaving no room for ambiguity or alternative interpretations. Relying on legal principles and precedents, the Tribunal held that the assessee failed to establish eligibility for deduction under Section 80C, overturning the AAC's decision and reinstating that of the ITO. The decision was further supported by a precedent from the Bombay High Court, ultimately allowing the Department's appeal and denying the deduction on the NSC investment sourced from the LIC maturity amount.
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