Section 80C deduction allowed for National Savings Certificates bought from accumulated savings, not just current-year taxable income.

Section 80C deduction is not confined to investments made out of taxable income of the relevant previous year; the Tribunal accepted that National Savings Certificates purchased from accumulated savings of earlier years remain eligible, because the provision is intended to encourage thrift and the source of funds does not by itself defeat the deduction where the investment otherwise satisfies the statutory conditions. The Revenue's objection based solely on the origin of the investment was rejected.

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Issues: Whether deduction under section 80C of the Income-tax Act, 1961 could be denied merely because the investment in National Savings Certificates was made out of post-tax accumulated savings or other non-taxable funds of earlier years rather than out of taxable income of the relevant previous year.

Analysis: The Tribunal held that section 80C is intended to encourage thrift and that its benefit is not confined to investments made out of the taxable income of the same previous year. It accepted that the source of the investment may be accumulated savings of earlier years, and that such source does not by itself defeat the statutory deduction where the investment is otherwise eligible.

Conclusion: Deduction under section 80C was allowable even though the National Savings Certificates were purchased out of accumulated savings and not out of the taxable income of the relevant year, and the Revenue's challenge failed.

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