Provident fund excess interest deemed as salary cannot be claimed as section 80L interest income for deduction.

Excess interest credited to a member of a recognised provident fund, deemed as salary under rule 6(b) of Part A of the Fourth Schedule read with section 17(1)(vi), cannot be recharacterised as interest income eligible for deduction under section 80L of the Income-tax Act, 1961. The fund's trustees held the invested monies as legal owners for the employees' benefit, not as agents of the assessee, so the assessee could not claim the deduction on that amount. The excess interest therefore fell outside section 80L, and the deduction claim failed.

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Issues: Whether excess interest credited to a member of a recognised provident fund, deemed as salary under the relevant provisions, qualified for deduction under section 80L of the Income-tax Act, 1961.

Analysis: Interest credited in excess of the prescribed limit under rule 6(b) of Part A of the Fourth Schedule is deemed to have been received by the employee and, by the combined operation of that rule with section 17(1)(vi), forms part of salary for purposes of sections 15, 16 and 17. The fund was held by trustees as legal owners for the benefit of the employees, not on behalf of the assessee as agent or owner of the invested monies. The assessee therefore could not treat the excess interest as interest income of the kind contemplated by section 80L, even though the trustees might have been entitled to claim the benefit in their own hands if assessable.

Conclusion: The excess interest did not qualify for deduction under section 80L and the claim failed.

Ratio Decidendi: Amounts deemed to be salary under the provident fund provisions cannot be recharacterised as eligible interest income for deduction purposes under section 80L, and a beneficiary cannot claim such deduction on trust income held and invested by trustees on the beneficiary's behalf only in the beneficial sense, not as agent.

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