ADARSH KUMAR JAIN vs. CIT CHANDIGARH

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ITR/129/1999HC Punjab & HaryanaPHHC01038561199909 September 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the matter appeared to be covered against the assessee by judgments of the Kerala High Court in CIT v. Abraham George [2000] 242 ITR 171 and the Orissa High Court in CIT v. Dr. Usharani Panda [1995] 212 ITR 119. However, since none appeared for the assessee, the Court did not consider it appropriate to answer the reference on merits. Consequently, the reference was returned unanswered. The operative direction was to return the reference unanswered. No issue was expressly left undecided, as the Court declined to decide the merits due to the absence of the assessee's counsel.

What were the facts?

This case involves a reference of questions of law to the High Court of Punjab and Haryana at Chandigarh under Section 256 of the Income Tax Act, 1961. The reference arises from an order dated March 25, 1998, passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh, concerning assessment year 1993-94. The assessee is Shri Adarsh Kumar Jain, and the respondent is the Commissioner of Income Tax. The dispute revolves around the disallowance of rebate under Section 88 of the Act in respect of Public Provident Fund (PPF) deposits. The authorities disallowed the rebate, contending that the deposits must be linked to income chargeable to tax in the previous year and not made from borrowed monies or other available funds, even if sufficient taxable income existed. The ITAT's order is under challenge.

What were the issues?

The Tribunal referred the following questions of law for the opinion of the High Court: 1. Whether, in the facts and circumstances, the authorities erred in law by not allowing rebate under Section 88 of the IT Act for PPF deposits, interpreting "out of his income chargeable to tax" to mean the deposit must be linked to income of the previous year alone, and disallowing it if made from other monies like borrowings, even with sufficient taxable income. 2. Whether, in the facts and circumstances, the authorities erred in law by misinterpreting CBDT Circular No. 3P dated 11.10.1965, ignoring the explanation that the deposit need not be specifically linked to funds representing taxable income, and instead relying on a portion that disallows benefits where payments cannot be attributed to taxable income. 3. Whether, in the facts and circumstances, the authorities misdirected themselves by ignoring the fact that the assessee had sufficient income of Rs. 76,100/- chargeable to tax to cover the PPF investment of Rs. 49,000/-, disallowing the rebate because the deposit was made from a bank account that had received borrowed monies. Assessee's contentions (implied by the questions): The assessee argued that the rebate under Section 88 should be allowed if sufficient income chargeable to tax is available, irrespective of the source of funds for the deposit, and that the interpretation of the relevant provision and CBDT circular by the authorities was erroneous. The assessee relied on the material portion of the CBDT circular which states that specific linking of funds is not required. Revenue's contentions: The revenue's position, as reflected in the authorities' actions and the questions referred, was that the deposit must be demonstrably made from income chargeable to tax in the previous year, and not from borrowed funds or other sources, even if overall taxable income was sufficient.

Which sections of the Income-tax Act were involved?

Section 256,Section 88

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 9.9.2010 Shri Adarsh Kumar Jain. -----Applicant. Vs. The Commissioner of Income Tax. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- None for the applicant. Ms. Urvashi Dhuga, Standing Counsel for the revenue. --- ADARSH KUMAR GOEL, J.

1.

Following questions of law have been referred for opinion of this Court under Section 256 of the Income Tax Act, 1961 (for short, “the Act”), by the Income Tax Appellate Tribunal, Chandigarh arising out of its order dated 25.3.1998 in I.T.A. No.960/Chandi/94 in respect of the assessment year 1993-94:- (i) Whether in the facts and circumstances of the case, the authorities had erred in law while not allowing rebate u/s 88 of the IT Act in-respect of deposits in PPF while interpreting words of section 88(2) of the IT Act, 1961 “out of his income chargeable to tax” stating the said deposit has to be linked and identified with his income of the previous year alone and the rebate could not be allowed if the deposit is made from other monies available with the assessee in his account by receipt of borrowing etc. even if the assessee had sufficient income chargeable to tax sufficient to meet the deposit.” (ii) Whether in the facts and circumstances of the case, the authorities erred in law in interpreting the CBDT circular No.3P dated 11.10.1965 clarifying the expression “out of his income chargeable to tax” by ignoring the material portion of explanation stating that it does not imply that assessee is required to link or identify the deposit/payments specifically with the funds representing his income chargeable to tax and relying only on a part there of that the benefit cannot be availed of in cases where it is clear that payments cannot be attributed directly or indirectly to the assessee’s income chargeable to tax.” (iii) Whether in the facts and circumstances of the case, the authorities had mi irected themselves in ignoring the material fact that the assessee had income of Rs.76100/- chargeable to tax which was sufficient to meet the investment/deposit of Rs.49000/- in PPF by disallowing the rebate because the deposit was made form his bank account in which he had received borrowed monies.”

2.

It appears that the matter is covered against the assessee by judgments of Kerala High Court in CIT v. Abraham George [2000] 242 ITR 171 and Orissa High Court in CIT v. Dr. Usharani Panda [1995] 212 ITR 119. However, since none appears for the assessee, we do not consider it appropriate to answer the reference on merits. The same is returned unanswered. (ADARSH KUMAR GOEL) JUDGE September 09, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3

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