1990 (2) TMI 116

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ed before me. 3. The assessee's accounting period ended on31-3-1986. The assessee's major source of income is share from two partnership firms. In addition he derived small amounts of income from property and interest. The assessee claimed deduction under section 80C in respect of payments towards Life Insurance Premium and purchase of National Savings Certificates. The admissible deduction was claimed in a sum of Rs. 12,365. The ITO declined to grant the deduction on the ground that income accrued only on the last day of the accounting year, i.e., 31-3-1986 and the payments for LIP and purchase of NSCs having been made earlier could not be said to be out of the assessee's income chargeable to tax. The learned ITO relied on CIT v. Ashokb....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of the accounting period. The Hon'ble Supreme Court has nowhere held that when an individual or a firm carries on business it earns nothing from day-to-day in the sense in which an ordinary person understands the concept of earning income. This is apparent from various observations of Hon'ble Supreme Court, for example, reference was made to Turner Morrison & Co. Ltd. v. CIT [1953] 23 ITR 152 (SC) and the following paragraph was reproduced at page 48 of the Report :-- "There can, therefore, be no question that when the gross sale proceeds were received by the agents in India they necessarily received whatever income, profits and gains were lying dormant or hidden or otherwise embedded in them. Of course, if, on the taking of accounts, i....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....'s case and has given no facts to show that the aforesaid payments could not be made by the assessee out of his income chargeable to tax and were made out of capital. 6. It is important to remember that even the Legislature has accepted the general concept that income is earned from day-to-day. That is why under the concept of pay while you earn, provisions for payment of advance tax during the accounting period itself have been made. If the principle of Ashokbhai Chimanbhai's case was applied to all situations then no income is earned when the instalments of advance tax have to be paid and on the basis of the ITO's thinking, a person could be said to be paying advance tax on amounts that have not actually been earned. 7. Further, if ....