Shivkumar vs Commissioner of Income Tax and Another

Dhirendra Mshra, J.—This appeal has been admitted for hearing on the following substantial questions of law:

(a) Whether the Tribunal was correct in law in treating payment/deposit amounting to Rs. 8,235 in PPF account was not contribution, ignoring the express provisions of Section 88(8)(i) of the Income Tax Act, 1961 and thereby erred in not granting rebate on the said amount ?

(b) Whether the Tribunal was correct as regards application of Section 234C considering tax calculation on the basis of assessment framed u/s 143(3) instead of tax calculations made by assessee on the basis of tax due on returned income ?

Briefly stated, facts of the case are that the appellant filed his IT return in the assessment year 1996-97 on 20-11-1996 declaring total income at Rs. 1,09,484. He had claimed rebate u/s 88 of the Income Tax Act, 1961 (for short the Act) in respect of the contribution to PPF at Rs. 30,000 and also Rs. 8,235 which was interest accrued in the PPF account. The assessing officer in a proceeding u/s 143(3) of the Act disallowed the rebate on interest of Rs. 8,235 credited to the PPF account. The assessee in his return had also computed interest u/s 234C of the Act on his total income at Rs. 108. After disallowing the rebate towards interest credited in the PPF account, the assessing officer determined the interest payable u/s 234C of the Act at Rs. 180.

Being aggrieved by the order of the assessing officer the appellant preferred an appeal before the Commissioner (Appeals) and the same was dismissed. Thereafter, the appellant preferred second appeal before the Income Tax Appellate Tribunal, Nagpur Bench, Camp at Raipur (for short the Tribunal) and the same has also been dismissed by the impugned order.

The appellant has impugned the order of the Tribunal on the ground that the Tribunal erred in treating the amount credited towards interest in his PPF account was not a contribution u/s 88(v) ignoring express provision of Section 88(8)(i) of the Act. So far as the first substantial question of law is concerned, referring to Section 88(8)(i) it was argued that contribution towards loan alone is excluded from the definition of contribution to the fund. This clearly reveals that the amount which accrues as interest to the PPF account is also deductible from the total income.

On the other hand, learned Counsel for the respondents has supported the impugned order.

The Tribunal reproducing Section 88(1) and (2)(v) of the Act held that to claim deduction u/s 88(1) the sum paid or deposited as a contribution by an individual to any provident fund alone qualifies for exemption. The sum of Rs. 8,235 cannot be said to be a contribution by the assessee to the provident fund.

From bare reading of Sub-sections (1) and (2)(v) of Section 88 of the Act, it is manifestly clear that deduction is permissible only for the contribution to the provident fund, set up by the Central Government, where such contribution is made by the assessee out of his income chargeable to tax. It is not in dispute that the interest accrued on the PPF account is not chargeable to tax. Section. 88(8)(i) only stipulates that the contribution to any fund shall not include any sums in repayment of loan. The above provision cannot be construed that the interest which accrues on PPF account and which is not chargeable to tax, is deductible from the total income.

Learned Counsel for the appellant vehemently argued that all the forums below have failed to deal properly as regards the provisions of Section 234C and treated the tax payable on the basis of assessment order u/s 143(3) as tax due on returned income and consequently raised the interest figure ignoring the fact that tax payable on the returned income was only required to be considered for application of provisions of Section 234C of the Act and not tax based on regular assessment u/s 143(3) of the Act.

The Tribunal has dealt with the aforesaid argument in para 8 of its order in detail and has held that the assessing officer has accepted the income returned by the assessee, however, tax payable on the returned income has been disputed by disallowing the claim of the assessee u/s 88 of the Act in respect of the interest credited in the PPF account. Since the assessee failed to pay the part of advance tax u/s 208 of the Act, therefore, computation of interest u/s 234C has been upheld. We are in agreement with the reasons assigned by the Tribunal for rejecting the grounds raised by the appellant against the order of assessment by the assessing officer.

In the result, we find no substance in this appeal, the same deserves to be dismissed and accordingly, it is hereby dismissed.

No order as to costs.