Decided on September 02,1982



K.R. Dixit, Judicial Member - (1.) [Paras 1 to 4 are not reproduced here as they involve minor issues.] 5. The Appeal Nos. 1722 and 1723 (Ahd.) of 1981 arise out of same set of facts and raise the same question. They raise a question of interpretation of Section 80V of the Income-tax Act, 1961 (hereinafter referred to as the 'Section' and 'the Act' respectively). 6. The assessee had borrowed a certain amount from one Lalbhai Dalpatbhai (HUF) for the payment of income-tax and had claimed relief under the section in respect of interest thereon. For the earlier assessment year 1976-77 the ITO had allowed the same. However, for these two assessment years, part of the amount is shown to have been borrowed from one Taral Siddharthbhai ('Taral') and the balance from one Swati Siddharthbhai ('Swati'). The assessee claimed the interest due on this amount also under the section. The ITO disallowed this claim on the ground that the amounts in question have not been borrowed for the payment of tax under the Act but were borrowed for the repayment of the earlier loan from Lalbhai Dalpatbhai (HUF). The Commissioner (Appeals) has confirmed this . 7. The short question for our consideration is whether borrowing from Taral and Swati can be said to be borrowed for the purpose of payment of tax as required under the section. On behalf of the assessee the learned counsel has argued that although the lenders had changed, the purpose of borrowing was the same, namely, the payment of tax under the Act. He has argued that if a person was asked the simple question that what the second loan was for, he would answer that it was for the payment of tax. This according to him should be true method of interpreting the section. He has also contended that the purpose of section was to encourage the people to pay the tax in time and if necessary, even by borrowing. Therefore, according to him, we should so interpret the section as to enhance and further this object. He has relied upon the decision of the Supreme Court in Chandulal Harjiwandas v. CIT [1967] 63 ITR 627 and also the decision of the Gujarat High Court in CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208. He has contended that from a practical standpoint it may not always be possible for an assessee to get a loan immediately for the entire period for which it may be necessary. Therefore, the assessee may immediately arrange for funds which would give him breathing time during which the loan for a longer term can be arranged. Hence, this practical difficulty should be borne in mind while interpreting the section. He has also relied upon Circular No. 28, dated 20-8-1969, F.No. 8/8/1969 IT (A-1). The learned departmental representative has relied upon the of the Commissioner (Appeals) which, inter alia states the requirements of the section as follows : Firstly there have to be taxes due from the assessee, secondly borrowings are to be made by an assessee, thirdly those borrowings are to be utilized for the purpose of payment of the due taxes and fourthly interest is to be paid on such borrowed monies. 8. The Commissioner (Appeals) has stated that on the facts it was clear that the borrowings made from Taral and Swati were not utilised for the payment of taxes and, therefore, interest paid to them on such borrowings could not possibly be a valid deduction under Section 80V. The learned departmental representative has emphasized that on the date on which the borrowings from Taral and Swati took place, there was no tax due under the Act because the payment had already been made in respect thereof. He has also replied that the CBDT Circular mentioned by the assessee's advocate is irrelevant. 9. At this stage it is apposite to consider the aforesaid decisions cited by the learned counsel for the assessee. In the case of Chandulal (supra) the question was whether a certain contract of insurance could be said to be the contract for life insurance with regard to the life of the assessee. The Court considered the meaning of 'life insurance' and held that the contract must be read as a whole and in spite of the certain clauses therein, must be considered to be, in substance, a contract of life insurance with regard to the life of the assessee. There were certain clauses in the contract which satisfied the meaning of life insurance and the Court ignored the other clauses. The present case is not such a one. The facts here go exactly contrary to the content of the words. 10. The second case which is the decision of the Gujarat High Court reiterates the well known general proposition. It states "It is a recognised rule of interpretation of statutes that the expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute and which effectuate the object of the Legislature. In interpreting a statute the court cannot ignore its aim and object." (p. 208) However, in that case the Court held : ...There is nothing in the language of the relevant statutory provisions which imposes a further limitation, namely, that if the condition laid down in the section is not satisfied in the very year of commencement of manufacture or production, the benefit of tax holiday will not be available, even if such condition is satisfied in the course of any of the subsequent four years....(p. 209) This shows that the Court did not go against the language of the section which we are here called upon to do. 11. In this case there is no doubt that when the second loan was taken from Taral and Swati, tax had in fact been paid already and there was no tax due at all for which the loans could be said to have been taken. The real question then is whether we can close our eyes to this fact. Reliance on this particular fact may appear to be technical. But the fact remains a fact and it cannot be overlooked. 12. It is all too easily said that we must so interpret the section as to further the object of the Legislature. But the object of the Legislature, be it remembered, is to be seen in the section itself. Even if the object was to encourage the assessee to pay the taxes in time we must realise that the Legislature has chosen to express itself in the words used in the section. The intention must, therefore, be taken to be controlled by the meaning of these words. Thus, the Tribunal has been invited to extend the meaning of the section beyond the limit of the words and to grant relief in a case where no tax was due for the payment of which the loan could be said to have been taken. We are apprehensive of this course of action because once the sheet anchor of the clear words is given up we do not know in what other kind of cases, we might be called upon to grant relief. Relief may be granted in a particular case but the task of this Tribunal does not end there. We would have to define a clear category of cases where such relief may be given although they do not strictly come within the clear words of the section. This, we are unable to do so. The first loan may be replaced by a second and the second by a third. Moreover, the object of the section is satisfied because relief has been granted for the interest paid on the loan taken from Lalbhai Dalpatbhai (HUF). Therefore, there is no need to go against the language of the section. Much has been said about purposive and liberal interpretation. It is time to restore the language of the law to its rightful place. 13. Regarding the circular, it is noticed that it relates to Section 24(1)(vi) of the Act. It may be possible to argue that the circular deals with a problem similar to the one in this case but a circular must be applied only to the cases covered by the particular section mentioned therein. No. legal principle can be derived from a circular so as to apply it to other cases. It is not the function of the CBDT to lay down legal principles which can be done only by the Legislature or by judicial bodies. For this reason alone the argument of the assessee based on the circular must be repelled. 14. The assessee has also submitted the following alternative ground : Without prejudice to the above ground the amount of interest ought to have been allowed as deduction under Section 57(3) of the Income-tax Act from other income. The contention before the Commissioner (Appeals) was that the borrowing from Swati and Taral was for maintaining and preserving the erstwhile income from other sources. If instead of borrowing from Taral and Swati the assets were sold to that extent, income would have been loss (sic). Reliance was placed on the decision in CIT v. H.H. Maharani Shri Vijaykuverba Saheb of Morvi [1975] 100 ITR 67 (Bom.) approved by the Supreme Court in Seth R. Dalmia v. CIT [1977] 110 ITR 644. However, the Gujarat High Court, in the case of Padmavati Jaykrishna v. CIT, held that the interest paid on amounts for payment of income-tax is not allowable deduction under Section 57 of the Act. In that case both the aforesaid decisions have been considered. Therefore, the asses-see's alternative ground is rejected. 15. In the result, the appeals for the two years are rejected.;

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