Cheque payment for National Savings Certificates counted as subscription in the year paid, making the section 80C deduction allowable.

Cheque payment to a duly authorised agent for purchase of National Savings Certificates constituted subscription in the previous year for section 80C deduction, because payment to the agent was payment to the issuing organisation in the ordinary course of agency business. The rules permitted purchase by cheque, and the later date on which the certificates were issued was not determinative. On that basis, the ITAT Delhi allowed the deduction in favour of the assessee.

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Issues: Whether payment by cheque to an authorised agent for purchase of National Savings Certificates was a valid subscription in the previous year for deduction under section 80C, and whether the date of issue of the certificates was decisive.

Analysis: Section 80C(1) read with section 80C(2)(h) allowed deduction for sums paid in the previous year as subscription to specified Central Government securities. The applicable notification specified National Savings Certificates (VI Issue and VII Issue) for this purpose. Under rule 8 of the National Savings Certificates (VII Issue) Rules, 1981, payment for purchase could be made by cheque, and rule 9 dealt with issue of certificates after realisation of the cheque. The receipt showed that the assessee handed over a cheque on 27 March 1985 to a duly authorised agent for purchase of six-year NSC, VII Issue. The payment to the authorised agent constituted payment to the National Savings Organisation in the ordinary course of the agency business. The statutory requirement was subscription in the previous year; the later date of issue of the certificates was not material.

Conclusion: The assessee's cheque payment amounted to subscription in the relevant previous year, and the deduction under section 80C was allowable in favour of the assessee.

Final Conclusion: The appeal was allowed because the assessee had validly subscribed to the notified security by payment within the previous year, and the subsequent issuance of certificates did not defeat the deduction.

Ratio Decidendi: Where a cheque, being an authorised mode of payment, is delivered to a duly authorised agent of the issuing organisation towards purchase of a notified security, the payment constitutes subscription in the year of tender for the purpose of section 80C deduction, irrespective of the later date of certificate issue.

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