1990 (2) TMI 116

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..... e claimed deduction under section 80C in respect of payments towards Life Insurance Premium and purchase of National Savings Certificates. The admissible deduction was claimed in a sum of Rs. 12,365. The ITO declined to grant the deduction on the ground that income accrued only on the last day of the accounting year, i.e., 31-3-1986 and the payments for LIP and purchase of NSCs having been made earlier could not be said to be out of the assessee's income chargeable to tax. The learned ITO relied on CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42 (SC). 4. On appeal the learned AAC held that the assessee derived income from dividend, interest on government securities and interest on FDRs. The income derived from these sources was Rs. 7,144 and .....

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..... come. This is apparent from various observations of Hon'ble Supreme Court, for example, reference was made to Turner Morrison Co. Ltd. v. CIT [1953] 23 ITR 152 (SC) and the following paragraph was reproduced at page 48 of the Report :-- "There can, therefore, be no question that when the gross sale proceeds were received by the agents in India they necessarily received whatever income, profits and gains were lying dormant or hidden or otherwise embedded in them. Of course, if, on the taking of accounts, it be found that there was no profit during the year, then the question of receipt of income, profits and gains would not arise, but if there were income, profits and gains, then the proportionate part thereof attributable to the sale pr .....

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..... the general concept that income is earned from day-to-day. That is why under the concept of pay while you earn, provisions for payment of advance tax during the accounting period itself have been made. If the principle of Ashokbhai Chimanbhai's case was applied to all situations then no income is earned when the instalments of advance tax have to be paid and on the basis of the ITO's thinking, a person could be said to be paying advance tax on amounts that have not actually been earned. 7. Further, if the ITO's thinking has its way then a businessman would never be able to claim any deduction under section 80C because, according to the ITO, no income arises till the end of the accounting period and if out of the income of one accounting p .....

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