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Issues Involved:
1. Exemption of City Compensatory Allowance from tax. 2. Deduction of repayment of loan taken from the General Provident Fund under section 80C of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Exemption of City Compensatory Allowance from Tax: The assessee claimed that the amount of city compensatory allowance received was exempt from tax based on the Gujarat High Court's decision in CIT v. S. G. Pgnatale [1980] 124 ITR 391. However, the Income Tax Officer (ITO) disallowed this claim. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision. The Tribunal noted that the Delhi High Court in CIT v. Uma Sankar Joshi had decided against the assessee on this matter. Consequently, following the Delhi High Court's judgment and the Tribunal's previous decisions, the Tribunal held this issue against the assessee. 2. Deduction of Repayment of Loan Taken from the General Provident Fund under Section 80C: The main point of contention was whether the repayment of a loan taken from the General Provident Fund qualifies for deduction under section 80C. The assessee had made a total deduction of Rs. 4,440, which included Rs. 2,400 as contribution towards provident fund and Rs. 2,040 towards repayment of the loan taken from the provident fund. The Tribunal examined section 80C, which provides for deductions in respect of contributions made to life insurance premia and provident fund. Specifically, sub-clause (iii) of clause (a) of sub-section (2) of section 80C allows deductions for contributions to any provident fund to which the Provident Funds Act, 1925 applies. The Tribunal noted that the term 'contribution' is not defined in the Act but is defined in the Fourth Schedule dealing with recognized provident funds. According to this definition, 'contribution' includes any sum credited by or on behalf of an employee out of his salary to the individual account of the employee. The Tribunal considered the argument that the repayment of the loan should be treated as a contribution since it is credited to the individual account of the employee. The departmental representative argued that allowing such a deduction would result in double benefit, as the original contribution would have already been deducted, and now the repayment would also be deducted. The Tribunal analyzed the definitions and concluded that the term 'contribution' under the Provident Fund Act includes amounts credited by way of addition, subscription, or deposit to the provident fund account. The Tribunal reasoned that repayment of the loan adds to the provident fund balance and should be considered a contribution. The Tribunal emphasized that section 80C does not distinguish between original contributions and repayments of loans. The Tribunal held that the entire amount of Rs. 4,440, which includes the repayment of the loan, qualifies for deduction under section 80C, subject to the limits specified in section 80C(1). The Tribunal directed the ITO to compute the income accordingly. Conclusion: The appeal was partly allowed. The Tribunal ruled against the assessee on the issue of city compensatory allowance exemption but accepted the claim regarding the deduction of the repayment of the loan taken from the General Provident Fund under section 80C.
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