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TMI Blog2004 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of NSCs purchased out of sale proceeds of motor cycle and out of loan secured on the basis of the NSCs purchased in the same financial year?" The reference relates to the assessment year 1985-86. Briefly stated the facts giving rise to the present reference are as follows: The respondent-assessee who earned income as an individual is employed with the Punjab National Bank, Daresi No. 2, Agra. Besides the provident fund contribution and insurance premium amounting to Rs. 2,490 and Rs. 590, respectively, the respondent had also claimed the benefit of investment of Rs. 37,000 in the purchase of National Savings Certificates (hereinafter referred to as "the NSCs") under section 80C of the Act. The details of the investment and the sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respondent from the Punjab National Bank was Rs. 47,877.50 the benefit for purchase of NSC amounting to Rs. 37,000 could not be denied to the respondent simply because he had purchased some NSCs out of the sale proceeds of his old motor cycle and by pledging the NSCs already purchased. He, therefore, allowed the benefit of section 80C of the Act to the respondent on the entire investment of Rs. 37,000 in the purchase of NSCs during the assessment year in question. Feeling aggrieved the Revenue preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal noticed that in the case of Chandulal Harjiwandas v. CIT [1967] 63 ITR 627 the apex court has held that the object of section 15(1) of the Indian Income-tax Act, 1922, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions: (1) CIT v. Dr. Usharani Panda [1995] 212 ITR 119 (Orissa); and (2) CIT v. Ram Mohan Rawat [2002] 255 ITR 555 (Raj). Having heard learned standing counsel we find that the facts are not in dispute. The respondent-assessee is an employee of the Punjab National Bank and has drawn the gross salary of Rs. 47,878 during the assessment year in question. He had purchased NSCs for Rs. 37,000 partly from the sale of old motor cycle and by pledging NSCs and partly from his savings from salary. The question is as to whether the respondent is entitled for deduction under section 80C of the Act in respect of such NSC which he had purchased from the sale proceeds of old motor cycle and by pledging of old NSCs or not. Under section 80C(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate life that all incomes are amalgamated and spent and we can safely draw the conclusion that the assessee who is a salaried person was putting amounts received by him to the common fund. It cannot be ruled out that the money received from fixed deposits was being spent by him and money received from salaries was invested in National Savings Certificates. In the aforesaid case, the assessee had purchased NSC for Rs. 10,000 out of fixed deposits for the previous years. The Orissa High Court has held that it cannot be a ground to deprive him of the benefit available under the Act since it is not in dispute that the amount is so negligible that it can be invested from out of his salary received during the year. In the case of Dr. Usharani P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction only if he invests in NSCs out of the income "chargeable to tax". Under the aforesaid provision chargeable to tax means the income of the current year and not the income of any other years. As held by the apex court in the case of Chandulal Harjiwandas v. CIT [1967] 63 ITR 627 the object of section 15(1) of the Indian Income-tax Act, 1922, which corresponds to section 80C of the present Act was the encouragement of thrift and it required to be interpreted in such a manner as not to nullify that object. The Punjab and Haryana High Court in the case of Ravi Kumar Mehra [1988] 172 ITR 108 held that if the interpretation as sought by the Revenue is placed on the provisions of section 80C of the Act it would nullify its object. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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