1999 (4) TMI 119 - AT - Income Tax

Summary

Issues Involved:
1. Whether the withdrawal from the National Savings Scheme (NSS) account is of a capital nature and not income.
2. Whether the withdrawal amount is chargeable to tax under the Income-tax Act, 1961.
3. Whether there is a specific head under which the withdrawal amount can be taxed.

Issue-wise Detailed Analysis:

1. Nature of Withdrawal from NSS Account:
The assessee argued that the withdrawal from the NSS account is a receipt of capital nature and not income. The contention was that the Legislature did not include such receipts in the definition of 'income' under section 2(24) of the Income-tax Act, 1961. The assessee relied on the Supreme Court's decision in National Cement Mines Industries Ltd. v. CIT, which stated that unless a receipt falls within the definition of income under section 2(24), it does not change its character. The assessee further argued that the Legislature has historically included specific capital receipts within the definition of income, such as duty drawback and winnings from lotteries, but failed to do so for NSS withdrawals.

2. Chargeability of Withdrawal Amount to Tax:
The assessee contended that sections 4 to 9 of the Act are charging sections, and section 5 defines total income. Since the withdrawal from the NSS account is not included in the definition of income, it cannot be included in the total income and is not chargeable to tax. The assessee cited the Supreme Court's decision in Union of India v. A. Sanyasi Rao, which emphasized that income must be assessed under charging sections. The argument was that section 80CCA falls within Chapter VI-A, which is not a charging section, and thus, the withdrawal cannot be taxed.

3. Specific Head for Taxation:
The assessee argued that there is no specific head under which the withdrawal from the NSS account can be taxed. The argument was that section 56, which deals with income from other sources, starts with 'income of every kind' and includes specific types of income specified in section 2(24). Since the withdrawal does not fall within the scope of 'income,' it cannot be taxed under section 56 or any other head.

Tribunal's Findings:

1. Nature of Withdrawal from NSS Account:
The Tribunal held that the definition of 'income' under section 2(24) is inclusive and not exhaustive. It includes not only natural and ordinary meanings but also artificial categories of income. The Tribunal referred to various case laws, including CIT v. Premanand Industrial Co-operative Services Society Ltd. and CIT v. Taj Mahal Hotel, which supported the view that the word 'income' is of wide impact and includes statutory income created by the Act. The Tribunal concluded that the withdrawal from the NSS account, deemed as income under section 80CCA(2), falls within the scope of 'income' as defined under section 2(24).

2. Chargeability of Withdrawal Amount to Tax:
The Tribunal noted that section 80CCA(2) creates a fiction by treating the withdrawal as 'deemed income' and provides for its chargeability to tax. The Tribunal emphasized that the definition of income under section 2(24) must be read with the context of the Act, which includes statutory fictions created by the Legislature. The Tribunal referred to the decision in CIT v. Harprasad & Co. (P.) Ltd., which stated that income must satisfy two conditions: it must be income and must be computed as per the Act. The Tribunal concluded that section 80CCA(2) provides both the definition and chargeability of the withdrawal as income, and thus, it is taxable.

3. Specific Head for Taxation:
The Tribunal held that section 56 of the Act, which deals with income from other sources, is a residuary head that covers all income not included under other heads specified in section 14. The Tribunal noted that the amount withdrawn from the NSS account is not included under any other head and is thus chargeable to tax under section 56. The Tribunal rejected the assessee's argument that there is no specific head for taxing the withdrawal amount.

Conclusion:
The Tribunal dismissed the appeals, holding that the provisions of section 80CCA(2)(a) are specific and provide for the definition and chargeability of the withdrawal from the NSS account as income. The authorities were justified in taxing the withdrawal amount.