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M/S Raj Kr. Dewan v. Cit - INCOME TAX REFERENCE No. 243 of 1991  RD-AH 297 (1 February 2005)
I.T.R. No.243 of 1991
Shri Raj Kumar Dewan Vs. Commissioner of Income tax,
And Sons,Meerut Meerut
Commissioner of Income tax, Vs. M/s Raj Kumar Dewan &
Meerut Sons C/o Dewan Rubber
Hon'ble R.K.Agarwal, J.
Hon'ble Prakash Krishna, J.
The Income Tax Appellate Tribunal, New Delhi , has referred the following questions of law under section 256 (1) of the Income Tax Act, 1961 ( here in after referred to as the Act) for opinion to this Court.
"1-Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in holding that the assessees was not entitled of relief under section 80-C of the Income tax Act, 1961 in respect of purchase of National Saving Certificates to the extent of Rs.5,000/- purchased by raising a loan?."
2- Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to relief under section 80-C of the Act in respect of Life Insurance Premium paid in the sum of Rs.17,915/- and National Saving Certificates purchased to the extent of Rs.5,000/-?"
The reference relates to the assessment years 1985-86 .
Briefly stated the facts giving rise to the present reference are as under:
M/s Raj Kumar Diwan and sons is he assessee, HUF whose relevant accounting year ended on 31-3-1985. The assessee purchased National Saving Certificates for Rs.10,000/- on 28-3-1985. According to the assessing authority these National Saving Certificates were purchased by taking loan from Master Ajay. The assessee also paid Life Insurance Premium amounting to Rs.17,915/- . According to the assessing authority this amount was procured by loan from M/s Raj Kumar and sons and since the investment , aforesaid, were not made out, out of the assessee's income chargeable to tax, relief under section 80-C was denied. In appeal the Commissioner of Income Tax (Appeals directed the grant of deduction under section 80-C . The Tribunal held that where the assessee temporarily raises loan from payment of Life Insurance Premium or purchase of National Saving Certificates and repays the loan within accounting period itself, investment should be made out of the income charge able to tax. In the present case it was found that National Saving Certificate of Rs.5000/- were purchased out of the loan not repaid during the accounting period. Therefore out of the purchase of National Saving Certificate for Rs.10,000/- the assessee would be entitled to relief under section 80-C (2) only on the sum of Rs.5000/- So far as payment of Life Insurance Premium is concerned it was held that the ass3essee was entitled to relief under section 80-C(2) of the whole amount.
Heard Sri Amitabh Agarwal, Advocate, holding brief of Sri P.K.Jain, learned Counsel for the assessee and Sri A.N.Mahajan, learned Standing Counsel for the Revenue.
We find that this Court in I.T.R.No.14 of 1989 Commissioner of Income Tax Agra Vs. Ramesh Chandra Khandelwal, decided on 17-12-2004 has held that it is normal behaviour of an individual's private life that all incomes are amalgamated and spent. The Income Tax Act does not require that the investment in NSC should be made from the same amount which an assessee had earned by way of income. It is always open to an assessee to either spend the amount earned by him as an income which is more than the amount invested under section 80-C. The investment in NSC can be said to be out of income of the previous year. This Court has agreed with the view taken by Orissa High Court in the case of Commissioner of Income Tax Vs. N.Benugopal (1991) 187 ITR 614, the Kerala High Court in the case of Commissioner of Income Tax Vs. Jobie K. John , (2000) 245 ITR 258 and Punjab and Haryana High Court in the case Ravi Kumar Mehra Vs. Commissioner of Income Tax ( 1988) 172 ITR 108 ( P & H ). This Court had respectfully dissented with the view taken by Orissa High Court in the case of Commissioner of Income Tax Vs. Dr. Usha Rani Panda ( 1995) 212 I.T.R. 119 and Commissioner of Income tax Vs. Ram Mohan Rawat (2002) 255 ITR 555 (Raj.)
For the reasons given in the case of Ramesh Chandra Khandelwal (supra) with which we respectfully agree we answer the question no.1 referred to us in negative i.e. against the Revenue and in favour of the assessee. The question no.2 is answered in affirmative i.e. against the Revenue and in favour of the assessee. There shall be, however, no order as to costs.
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