VIRENDRA D. PATHAK Vs. ITO

JUDGEMENT

(1.) THE only issue arising out of this appeal relates to rebate under section 88 of the Income Tax Act, 1961.

(2.) THE assessed had claimed rebate under section 88 in respect of investments in Master Equity Plan at Rs. 10,000 and Public Provident Fund at Rs. 40,000. On verification of bank pass -book, it was found that the aforesaid investments of Rs. 50,000 was made on 23 -3 -1993, out of the loan taken by the assessed from his brother. The claim of the assessed was rejected by the assessing officer on the ground that the investment made by him was not out of chargeable income. The action of the assessing officer has been confirmed by the Commissioner (Appeals) vide order, dated 29 -9 -1994. Aggrieved by the same, the assessed is in appeal before the Tribunal.

(3.) THE learned counsel for the assessed Mr. Khandelwal has submitted before us that assessed had taxable income of Rs. 1,80,260 out of which loan of Rs. 1,35,000 had been given to Pathak Trust. Since the assessed could not get the money back from the said trust, he took loan of Rs. 50,000 from his brother Shri N.D. Pathak for making aforesaid investments. In this connection, he drew our attention to the letter of the assessed dated 15 -3 -1993, written to the trustee of the Pathak Trust requesting to refund the sum of Rs. 50,000. This letter appears at p. 5 of the paper book. At p. 6 of the paper book, there is a letter from Shri N.D. Pathak who is the brother of the assessed as well as trustees of the trust, wherein it has been stated that the required funds were not readily available with the trust. However, it was stated by him that he was enclosing a personal cheque of Rs. 50,000 which he will arrange to adjust against the loan to the trust. In the light of this factual aspect, it was argued by him that the assessed was forced to borrow the amounts even though he had sufficient funds out of the income chargeable to tax. Proceeding further, it was argued by him that provisions of section 88 being incentive provision, should be construed liberally. Reliance was placed on the decision of the Supreme Court in the case of Chandulal Harjiwandas v. : [1967]63ITR627(SC) . He further relied on the decision of the Punjab and Haryana High Court in the case of Ravi Kumar Mehra v. and the decision of the Tribunal viz. Assistant Commissioner v. Dr. Smt. Ujjawala Sharma, (1997) 57 TTJ (Ind) 532 and in the case of S.P. Banerjee v. Dy. CIT, (1990) 32 ITD 514 (Bom). On the other hand, the learned Departmental Representative has strongly relied on the orders of the lower authorities and submitted that if the case of the assessed is accepted then the words "out of his income chargeable to tax" used by the legislature in sub -section (2) of section 88 would become redundant.