Arijit Pasayat, C.J:— At the instance of the Revenue, following question has been referred under S. 256(1) of the Income-tax Act, 1961 (in short ‘the Act’) by the Income-tax Appellate Tribunal, Cochin Bench (in short ‘the Tribunal’) for opinion of this Court:
“Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of the contribution made to Public Provident Fund even though the contribution had not come out of the income chargeable to tax?”
2. Assessee claimed deduction in respect of a sum of Rs. 80,000/- deposited in Public Provident Fund under S. 80C of the Act. Same was denied to him by the assessing officer on the ground that it did not have any nexus with “income chargeable to tax” for the concerned previous year relating to assessment year 1989–90. Assessee earned income from interest on bank deposits. Deposit in Public Provident Fund was admittedly not made out of the interest income.
3. In appeal the Commissioner of Income-tax (Appeals) (in short ‘the C.I.T (A)’) confirmed view of the assessing officer. The matter was carried in second appeal before (he Tribunal. Relying on a decision of the Punjab and Haryana High Court in Ravi Kumar Mehra v. C.I.T, (1988) 172 ITR 108, the Tribunal allowed the claim.
4. Thereafter, reference was sought for and prayer was accepted.
5. According to learned counsel for the revenue, the approach of the Tribunal is erroneous as it failed to notice the clear and unambiguous language of S. 80C of the Act. None appeared for the assessee inspite of notice.
6. In order to appreciate the stand of the revenue, it is necessary to take note of S. 80C. Sub-s. (2)(a) of S. 80C throws considerable light on the controversy. The clear language used in the provision is “any sums paid in the previous year by the assessee out of his income chargeable to tax” (underlined for emphasis). Obviously, the deduction in terms of S. 80C can be granted if the payment is made out of his “income chargeable to tax.” It is to be noted that while considering S. 15(1) of the Income Tax Act, 1922 (in short’ 1922 Act’), the question arose whether absence of specific provision to the effect that payment must come out of income chargeable to tax, would make any difference. In S. Inder Singh Gill v. Commr. of Income tax, (1963) 47 ITR 284, it was observed that the absence of such a provision would not make any difference. The logic was that though S. 15(1) of 1922 Act in terms does not say that the tax shall not be payable in respect of any sums paid by an assessee out of his total income to effect an insurance on the life of the assessee, it would not make any difference. The language in which the sub-section is couched postulates that the sums exempted under sub-s. (1) of S. 15(1922 Act) would have been chargeable to tax, but for the exemptions provided by the Act. The exemption granted is from charging the said sums to tax. The question of exempting any sum from being charged to tax arises only when that sum could or would possibly enter the field of that particular taxation. The payment in the case at hand undisputedly was not made out of the income chargeable to tax. That being the position, the Tribunal was not justified in holding that even if contribution did not come out of the income chargeable to tax, it was yet allowable as a deduction. Similar view has been expressed by the Orissa High Court in C.I.T v. Dr. Usharani Panda, (1995) 212 ITR 119. We agree with that view.
7. The inevitable conclusion therefore is, only where payment comes out of the income chargeable to tax, it would qualify for deduction. Our answer to the question therefore, is in the negative, in favour of the revenue and against the assessee.
8. The Reference is disposed of accordingly.