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TMI Blog2019 (3) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... ned u/s. 36(1)(viii) - HELD THAT:- Being a Banking Company, it is clear that the assessee is a Specified entity within Clause (iii) of Explanation (a) to Section 36(1)(viii). Amendment provided the deduction to National Housing Bank. But the amendment also substituted the previous words with words 'Development of Housing' which has to be interpreted in its plain dictionary meaning in absence of any definition given. We cannot read into law anything that is not specifically provided therein. Construction/purchase of individual houses does not tantamount to Housing Development. Hence, we uphold the action of the lower authorities in so far as the disallowance of the claim of the assessee for advances/loans given for Development of Housing is concerned. No deduction shall be allowed to assessee u/s 36(1)(viii) for the amount claimed by assessee in respect of advances/loans given for individual houses. Deduction u/s 36(1)(viii) computation - as per DR assessee had not advance any loan for such purposes - HELD THAT:- No infirmity in the order of the CIT(A) in granting relief to the assessee u/s. 36(1)(viii) of the Act with regard to providing long term finance for industrial or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessing Officer with reference to the accounts of the assessee- Banks for each year. Since we find that the rationale adopted by the Assessing Officer to estimate the expenditure for the purpose of disallowance under Section 14A is not tenable, we feel the matter should be restored to the Assessing Officer for making disallowance under section 14A by reasonably estimating as nearly as possible the expenditure incurred for earning the tax free income. This should be done after giving opportunity to '.he asses see-banks to suggest their own formula with reference to accounts for the purpose of arriving at the actual amount or near actual amount The disallowance on estimated basis has to be done as above until Rule 80 was framed and thereafter it is for the Assessing Officer to make disallowance by following sub-section (2) of Section 14A and Rule 80 of the Income Tax rules. 6. So far as the disallowance of administrative expenditure is concerned, we feel considering the fact that there is no precise formula for proportionate disallowance, no disallowance is called for, for proportionate administrative cost attributable to earning of tax free income until Rule 80 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm finance for development of housing in India, he observed that construction/purchase of individual houses does not tantamount to housing development. Hence, he upheld the action of the Assessing Officer in so far as the disallowance of the claim of the assessee for advances given for development of housing is concerned u/s. 36(1)(viii) of the Act. 8. Against this, both the Revenue as well as the assessee are in appeal before us. The Ld. AR had made elaborate submissions which has been extracted in the CIT(A) s order. The Ld. DR relied on the order of the Assessing Officer. 9. We have heard the rival submissions and perused the record. As regards the eligibility of the assessee for deduction u/s 36(1)(viii), first point to be considered is whether the assessee is a Specified Entity. For this we will have to consider Explanation (a) to Section 36(1)(viii) which is reproduced below: (i) A Financial Corporation specified in Section 4A of the Companies Act, 1956 (1 of 1956); (ii) A financial corporation which is a public sector company (iii) A banking Company (iv) A co-operative bank other than a primary agricultural credit society or a primary co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether at the same time. 9.4 However, the assessee referred to legislative history of Section 36(1)(viii). Prior to its amendment by the Finance Act, 2009 all Banking Companies were entitled to deduction u/s 36(1)(viii) for the profits generated from the business of providing long-term finance for the construction or purchase of houses in India for residential purposes. Now let us quote from the Explanatory Circular for Finance (No.2) Act, 2009. 17. Special deduction under section 36(1) (viii) to National Housing Bank (NHB) 17.1 Clause (viii) of sub-section (1) of Section 36 [section 36(1)(viii)] provides special deduction to financial corporations and banking companies of an amount not exceeding 20% of the profits subject to creation of a reserve. Explanatory Circular for Finance (No.2) Act, 2009 Page 22 of 63 17.2 National Housing Bank (NHB) is wholly owned by Reserve Bank of India and is engaged in promotion and regulation of housing finance institutions in the country. It provides re-financing support to housing finance institutions, banks, ARDBs, RRBs etc., for the development of housing in India. It also undertakes financing of slum projects, rural housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per sec.36(1)(viii), deduction is allowable to a banking company for eligible business of providing long term finance for: (a) Industrial or agricultural development. (b) Development of infrastructure facility in India or (c) Development of housing in India. According to the Ld. DR, with regard to eligibility for deduction u/s. 36(1)(viii), the assessee should advance loan for eligible business, however, the assessee had not advance any loan for such purposes. 10.1 We have heard the rival submissions and perused the record. The CIT(A) has placed reliance on the decision of the ITAT in the case of Ernakulam District Co-op. Bank Ltd. vs. Joint Director Income-tax (TS-7866-IT AT-2017 (Cochin) wherein it was held as under: 9. Briefly stated the facts in relation to the revenue's appeal is that during the assessment year 2010-11, the assesse had claimed an amount of ₹ 1,73,33,833/- as deduction u/s.36(1)(viii) of the IT Act. However, while completing the assessment, the Assessing Officer restricted the same to ₹ 45,93,784/-. For restricting the deduction, the Assessing Officer held that the assesse is not entitled for deduction in respect of the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der and the same needs to be quashed. The Ld. Counsel for the assessee, on the other hand, reiterated the submission made before the Income Tax Authorities. Joint Director of Income tax {TS-7866-IT AT-2017 (Cochin)-O} 9.3 We have heard the rival submissions and perused the material on record. As per provisions of section 36(1)(viii) of the IT Act, the eligible business means business of providing long term finance for industrial or agricultural development, development of infrastructure facility in India and development of housing in India. In our view, industrial purposes includes all types of industries both manufacturing as well as service industry. Admittedly, these are loans advanced by the assesse for long term finance and the details of the purpose for which the loans are advanced are enumerated in para 8.5 of the impugned order of the CIT(A). The CIT(A), after examining the purpose for which the loans were advanced had categorically held that the interest income, out of loans enumerated, clearly falls within the definition uf 'eligible business' under section 36(1)(viii) of the Act. This factual finding of the CIT(A) was not dispelled by the revenue b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue had come up for consideration in assessee s own case in ITA No.29/Coch/2017 dated 13/12/2017 wherein it was held as under: 10. After hearing both the parties and perusing the relevant material on record, we find that the learned CIT(A) has rightly confirmed the charging of interest u/s 234B by following the decision of the Hon ble jurisdictional High Court in assessee's own case in the preceding assessment year, i.e. A.Y. 2005- 2006. The relevant part of the High Court order is reproduced as under. - It was contended by the assessee that the charging of interest under Section 234B is erroneous as the assessee cannot anticipate the conditions likely to be made by the assessing officer in regular assessment on a future date. Section 234B provides that short falls has to be taxed under Section 43(3). The matter is covered by the judgment of the Supreme Court in the case of Commissioner of Income Tax Vs. Anjum M.H. Ghaswala . (252 ITR 1) and It was held that interest contemplated under Sections 234A, 2348 and 234C is mandatory in nature. In view of the fact that the appellate authorities have considered the matter based on the judgment of the Supreme Court, this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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