1997 (5) TMI 18 - HC - Income Tax

Summary

Issues: Interpretation of deduction under section 36(1)(viii) of the Income-tax Act, 1961.

Analysis:
The judgment delivered by the High Court of Himachal Pradesh involved the interpretation of the deduction under section 36(1)(viii) of the Income-tax Act, 1961. The primary issue was whether the deduction should be allowed at the prescribed percentage of the total income computed before allowing any deduction under Chapter VI-A and before considering the deduction allowable under section 36(1)(viii) itself. The assessee's claim for such deduction was initially rejected by the Assessing Officer and upheld by the Appellate Assistant Commissioner. The matter was then taken to the Tribunal for resolution.

The Tribunal considered the matter and referred to a previous decision in a similar case for the assessment year 1979-80. The Tribunal, based on the circular of the Central Board of Direct Taxes and a decision of the Patna High Court, ruled in favor of the assessee. It directed the Assessing Officer to recompute the deduction in line with the directions provided in the order. Consequently, the Tribunal reversed the orders of the lower authorities and allowed the contention of the assessee.

The High Court further analyzed the issue by referring to judgments of various High Courts. It noted that, except for the Karnataka High Court, all other High Courts had taken a consistent view on the matter. The Madhya Pradesh High Court and the Calcutta High Court, among others, had held that the deduction under section 36(1)(viii) should be calculated based on the total income of the assessee before making deductions under the said clause. The Calcutta High Court, in particular, highlighted the statutory recognition received by this view through an Amendment Act in 1985.

In conclusion, the High Court of Himachal Pradesh affirmed the decision of the Tribunal, holding that the deduction under section 36(1)(viii) of the Income-tax Act should be allowed at the prescribed percentage of the total income computed before making any deduction under Chapter VI-A and before considering the deduction allowable under section 36(1)(viii) itself. The court referred to the consistent views of various High Courts and answered the question in the affirmative, in line with the Tribunal's decision.