TaxTMI 
TaxTMI 
1998 (6) TMI 21
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....ideration. Section 80V of the Act, as it stood then, read as under : "80V. In computing the total income of an assessee, there shall be allowed by way of deduction any interest paid by him in the previous year on any money borrowed for the payment of any tax due from him under this Act." Learned counsel for the assessee submitted that in computing the total income of the assessee, deduction of any interest paid by him on any money borrowed for payment of tax due from him under the Act must be allowed. Counsel submitted that the underlying object of that provision was that whenever an amount of tax was due from an assessee, it was expected of him to pay the said amount. If such a person was not ill a position to pay tax, it was provided in the Act that it was open to him to borrow money for the purpose of payment of tax due from him. Obviously, in these circumstances, the assessee had to pay interest on such borrowing. Parliament, therefore, made the above provision granting the benefit of deduction of interest paid on such money borrowed by the assessee. In the instant case, it is the case of the assessee that for payment of tax due from him he had to take a loan from Lalb....
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....e amount of tax was paid, the provisions of section 80V of the Act could not be pressed in service by the assessee for payment of interest on the loan taken from Taral and Swati for repayment of the loan to Lalbhai Dalpatbhai (HUF). It is also observed that when the borrowings were made from Taral and Swati, there was no tax due under the Act because the payment had already been made in respect of such tax. The object of the section, according to the Tribunal, was to enable the assessee, only to pay tax as due and not to repay the loan and, hence, the benefit claimed by the assessee could not be granted. The Tribunal was also of the opinion that if the contention of the assessee would be upheld, in several cases, the assessees may come forward to claim exemption in a series of loans. The first loan may be replaced by a second and the second may be replaced by a third. There may not be an end to such replacement of loans. Such a construction would not be in accordance with law. Mr. Shah, the learned advocate for the assessee, raised various contentions. He submitted that the underlying object of the provisions of section 80V of the Act has been totally ignored by the Tribunal. He....
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....rpose of payment of tax, the benefit of deduction under section 80V of the Act must be allowed. It was urged by Mr. Shah that it is not the case of the authorities that the loans from Taral and Swati were not for repayment of the loan borrowed by the assessee for payment of tax but was a device to avoid payment of tax. If it were not so, the argument proceeded, there was no reason to reject the said benefit and deduction under section 80V of the Act. Mr. Desai, on the other hand, supported the view taken by the Tribunal. He submitted that the language of section 80V is clear and unambiguous. Deduction under the said provision can be granted only for payment of tax. The case of the assessee was that he had to like loan from Lalbhai Dalpatbhai (HUF) for paying tax for which he had to pay interest to Lalbhai Dalpatbhai (HUF). He claimed the benefit of deduction and it was granted to him. But the application of section 80V of the Act and the benefit thereunder came to an end as soon as the benefit was claimed and was granted to the assessee. Thereafter, there was no question of applying the said section, when the assessee had taken loans from Taral and Swati. According to Mr. Desai,....
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....payment of any tax due from him under the Act, he would be entitled to deduction on payment of interest on such loan. The Tribunal, in our view, rightly came to the conclusion that the assessee had taken a loan for payment of tax from Lalbhai Dalpatbhai (HUF) when there was liability to pay tax and he had to comply with it. At that time, therefore, section 80V of the Act was applicable and accordingly lie could claim deduction for the payment of interest on the said amount which he had to pay to Lalbhai Dalpatbhai (HUF). It is not disputed that the said benefit was claimed by the assessee and it was granted by the Income-tax Officer in the year 1976-77. The case of the assessee, however, was that since the amount of loan which was taken by him from Lalbhai Dalpatbhai (HUF) could not be repaid, lie had to take another loan from Taral and Swati. According to him, this was done in view of the liability to repay the loan of Lalbhai Dalpatbhai (HUF), which was for payment of tax. If the object underlying section 80V of the Act is to be considered, the second loan could be said to be referable to payment of tax, inasmuch as he could not repay the loan within the stipulated period to Lalb....
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.... is no ambiguity in the language used by the Legislature, According to us, the Tribunal was right in observing that deduction can be granted for payment of tax which was allowed to the assessee. The ratio laid down in Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 231 ITR 814 (SC), does not carry the case of the assessee further, as in that case, the object was grant of deduction for marketing of agricultural produce and keeping the object in mind, the apex court held that the said benefit must be extended to the societies. In the case on hand, the second loan was not for payment of tax and once the loan was obtained and the amount of tax was paid, section 80V of the Act ceased to apply. To a subsequent loan for repayment of the first loan, section 80V has no application. Hence, the above argument does not impress us. So far as the circular of the Central Board of Direct Taxes is concerned, in Builders Associations of India v. Union of India [1994] 209 ITR 877, the Supreme Court held that the circular issued by the Board explaining the provisions of one section would not be relevant and would not apply to the provisions of another section. In that case, a circ....