M C MUTHANNA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these references at the instance of the assessee under section 256(1) of the INcome-tax Act, 1961 (hereinafter referred to as "the Act"), the following common question of law has been referred to this court for its opinion "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding notwithstanding the provisions of section 161 of the INcome-tax Act, 1961 *The assessee is an individual and was employed in Bombay Burmah Trading Corporation Limited.

(2.) THE assessee was a member of an approved provident fund constituted by the company for which recognition was granted under section 58B(1) of the Indian Income-tax Act, 1922, by an order of the Commissioner of Income-tax, Bombay, on February, 3, 1938. THE fund was constituted under certain rules and was a contributory provident fund. By virtue of the rules, the fund came into possession of certain moneys. One of the rules governing the fund and its administration provided for the investment of the funds received by the trustees and for the payment of interest realised thereby to the members. THE assessee received interest from the investments made out of the amounts belonging to the provident fund and such interest, to the extent prescribed in clause (b) of rule 6 of Part A of the Fourth Schedule to the Act, was excluded from the assessment.

(3.) THESE amounts were no doubt received by the assessee, but the amounts represented interest earned by the trust on investment of the money belonging to the trust by the trustees in banks and other securities. Whether the amounts so received by the assessee could be regarded as income by way of interest on deposits with a banking company within the meaning of section 80L(1)(c)(vi) of the Act and included in the gross total income of, the assessee would be a relevant aspect in the consideration of the claim for deduction under section 80L of the Act made by the assessee. It is obvious that if the interest on the investment made by the trustees of the provident fund and distributed to the assessee partakes of the character of "Salary" under the provisions of the Act, then, it would not qualify for the benefit of deduction under section 80L of the Act. Indeed, in the orders of the Appellate Assistant Commissioner and also the Tribunal, this aspect had been dealt with and we are of the view that this is only a closely related aspect with reference to the question referred.