TMI Blog2013 (6) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are not intended to be included by the parliament. Thus the payment of LIC premiums made during the previous year out of loan funds are also eligible for deduction u/s 80C - appeal of the assessee allowed. - ITA No.418/Coch/2010 - - - Dated:- 5-4-2013 - N R S Ganesan and B R Baskaran, JJ. For the Appellant: Shri R Krishnan, CA For the Respondents: Smt S Vijayaprabha, Jr. DR Shri M Anil Kumar, CIT(DR) ORDER:- Per: B R Baskaran: The appeal filed by the assessee is directed against the order dated 05-04-2010 passed by Ld CIT(A)-IV, Kochi and it relates to the assessment year 2006-07. This appeal was originally disposed of by the SMC bench of the Tribunal on 31.10.2011. Thereafter, the assessee moved a miscellaneous application seeking recall of the order and upon finding merits in the said petition, the Tribunal recalled its order referred above and thereafter the appeal was heard by this division bench. 2. The solitary issue urged in this appeal is whether the Ld CIT(A) was justified in holding that the assessee is not entitled for deduction u/s 80C of the Act on the LIC premium paid in respect of his LIC policies. 3. The facts relating to the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y condition that the contribution towards LIC premiums should be made out of income chargeable to tax. He further submitted that the old provisions of sec. 80C of the Act, which existed prior to the introduction of rebate u/s 88 of the Act, was having a condition that the LIC premium amounts should be paid out of income chargeable to tax. Accordingly he submitted that the impugned LIC premium payments have been made by the assessee out of the loan availed from his grand father and hence the assessee is eligible for deduction u/s 80C of the Act. 6. On the contrary, the Ld D.R submitted that the impugned LIC payments have been shown as an asset in the books of accounts of the proprietary concern of the grand father of the assessee and hence it cannot be said that the assessee has availed loan to pay the LIC premiums. The Ld D.R further submitted that the payments specified in sec. 80C of the Act should be paid out of income chargeable to tax, since the object of the provisions of sec. 80C of the Act is to encourage thrift and savings. He further submitted that the absence of the words the words out of income chargeable to tax in the newly introduced provisions of sec. 80C, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax . He submitted that the Hon ble Kerala High Court did make a reference to the decision rendered by the Hon ble Bombay High Court in the case of S.Inder Singh Gill Vs. CIT (1963)(47 ITR 284)(Bom). The Hon ble Bombay High Court had rendered its decision in the context of sec. 15 of the erstwhile Income tax Act, 1922 (hereinafter 1922 Act). Under the provisions of sec. 16(1)(a) of the 1922 Act, the sums exempted under the section 15 of the Act are to be included in the Total income . Further the provisions of sec. 15 was couched with the words Tax shall not be payable . The Bombay High Court held that the above said language postulates that the sum exempted under subsection (1) of section 15 would have been chargeable to tax but for the exemptions provided by the Act. Further the deduction specified in sec. 15 is necessarily to be included in the total income as per the provisions of sec. 16(1)(a) of the 1922 Act. Hence, on the combined reading of sec. 15 and sec. 16 of the 1922 Act, the Bombay High Court held that the absence of the words out of income chargeable to tax does not make any difference and the payments eligible for deduction u/s 15 of the 1922 Act should be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee or in respect of a contract for a deferred annuity on the life of the assessee or on the life of a wife or husband of the assessee, or, as a contribution to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies The Bombay High Court considered the words Tax shall not be payable and held that the said language signify that sources of making payment of LIC premiums should be liable to tax and in that case only the tax shall not be payable if the same is used for making LIC premium payments. The Bombay High Court also considered the provisions of sec. 16(1)(a) of the 1922 Act which provided that the sums exempted from taxation under section 15 are to be included in the total income . The relevant observations made by the Hon ble Bombay High Court are extracted below for the sake of convenience:- Sub-section 1(a) of section 16, inter alia, provides that the sums exempted under section 15 are to be included in the total income of the assessee. These provisions of sub-section (1)(a) of section 16 which say that the sums exempted from taxation under section 15 are to be included in the total income show that the sums exempted have the character and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees. A plain reading of the above said provisions show that the deduction under sec. 80C shall be made if the sums specified in sub-section (2) is paid or deposited in the previous year. It does not place any condition about the source for making the payments or deposit. Further the deduction is given while computing the total income, i.e., out of gross total income. This is in total contrast to the provisions of sec. 15 of the 1922 Act, which used the language that that Tax shall not be payable . 14. The Ld A.R also pointed out that only certain sections included in Part-B of Chapter VI-A contain the words out of income chargeable to tax and certain sections do not contain the above said words, i.e., within the sections included in Par-B of Chapter VI-A of the Act, the parliament has prescribed the condition that the payments should have been made out of income chargeable to tax only in certain sections, meaning thereby, the parliament has consciously omitted the above said condition in certain sections. As stated e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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