COMMISSIONER OF INCOME TAX Vs. USHARANI PANDA

JUDGEMENT

(1.) ON an application being filed by the Revenue under Section 256(2) of the Income-tax Act, 1961, this court directed the Tribunal to refer the following question of law for the opinion of the court :

(2.) THE short facts necessary for expressing the opinion on the question of law formulated by this court are that an individual had purchased the National Savings Certificates of Rs. 30,000 during the assessment year 1985-86 and claimed deduction on that score under Section 80C of the Income-tax Act. THE aforesaid certificate had been purchased out of a fixed deposit of Rs. 40,158 made earlier which matured on January 10, 1985. THE Assessing Officer did not allow the deduction to the assessee under Section 80C on the ground that the amount from which the certificate has been purchased was not chargeable to tax and, therefore, the, provisions of Sub-section (2) of Section 80C will not apply. THE assessee being aggrieved by the order of the Assessing Officer carried the matter in appeal. THE appellate authority disagreed with the conclusion of the Assessing Officer and came to the conclusion that the amount invested in the National Savings Certificates should have come from the income of the assessee and that it is not necessary that it should have come from the chargeable income of the previous year in which the relief was claimed and in view of the fact that the fixed deposit made earlier was out of the chargeable income of that year, the deduction claimed has to be allowed. Against the appellate order, the Revenue carried the matter in second appeal to the Tribunal. THE Tribunal came to hold that there is nothing in the Act which requires that the investment for the purpose of Section 80C must have direct nexus with the income earned by the assessee. As long as the investments do not exceed the income available to the assessee, the deduction under Section 80C should be allowed. THE second appeal having thus been dismissed, the Revenue filed an application before the Tribunal and being unsuccessful therein, approached this court under Sub-section (2) of Section 256 and on direction issued by this court, the Tribunal has submitted the statement of case.