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TMI Blog1990 (11) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deduction allowable to the assessee under clause (viii) of sub-section (1) of section 36 of the Act. The Income-tax Officer computed the deduction at the stipulated percentage of the total income arrived at after allowing the said deduction, that is to say, he reduced the total income by such allowable deduction and computed the deduction on the balance. The assessee went in appeal before the Commissioner of Income-tax (Appeals) who, following the judgment of the Patna High Court in the case of CIT v. Bihar State Financial Corporation [1983] 142 ITR 518, held that, for the purpose of deduction under section 36(1)(viii), the total income of the assessee should be taken without reducing it by the amount of the said deduction. The Revenue came in appeal before the Tribunal. The Tribunal endorsed the order of the Commissioner of Income-tax (Appeals). Before us, learned counsel appearing for the parties reiterated the contentions raised before the Tribunal. Section 36(1)(viii), as originally enacted, provided that if a financial corporation, for the time being approved by the Central Government for the purpose of this clause, which is engaged in providing long-term finance fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (at pages 522, 524): "The question for consideration is, whether the literal and the face meaning of the expression 'total income' given in section 2(45) has got to be taken for the purpose of finding out the extent of the admissible deduction under clause (viii) of section 36(1), as has been the stand of the Revenue, or is it legitimate to take the view that the context in this regard requires otherwise ? In the case of a corporation of the kind envisaged in clause (viii), of which kind undoubtedly the assessee-Corporation is, the amount carried to the special reserve fund by the Corporation has got to be allowed as a deduction. If the amount falls short of the maximum limit provided in the clause, then the whole of the amount will be allowable as a deduction. But if the amount is in excess of the maximum limit, then, on account of the transfer of a portion of the income to the special reserve fund, an amount which will be equivalent to one-tenth of the total income will be allowed and the rest will be disallowed. I am, however, of the opinion that in the process of computing the income all additions which can justifiably be made should be made ; all deductions which are permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income, and not ten per cent. of the total assessed income, before deduction of the amount so allowed. In CIT v. Bihar State Financial Corporation [1986] 159 ITR 275, the Patna High Court, following the decision in the aforesaid case, held that the special reserve had to be allowed on the basis of the total income computed before allowing the deduction for special reserve. Regarding the amended provisions, the court was of the opinion that the amendment strengthened the interpretation which the Corporation wanted the court to put on the provisions. In CIT v. Andhra Pradesh State Financial Corporation [1989] 175 ITR 87, the Andhra Pradesh High Court examined the question regarding the interpretation to be placed on the provisions of section 36(1)(viii) of the Income-tax Act, 1961, and held that, for the purpose of allowing a deduction under the said section, the total income of the assessee has to be computed before giving any deduction under the said section. There, the Andhra Pradesh High Court observed as follows (at page 89) : "The controversy can be illustrated by giving an example. Assuming the total income before applying this provision to be Rs. 1,000, according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court held as follows (at page 178) : "Clause (viii) of section 36(1) of the Act provides for deduction on the basis of total income computed before making any deduction under Chapter VI-A of the Act. Total income as defined by section 2(45) of the Act means the total amount of income referred to in section 5, computed in the manner laid down in the Act. Chapter III of the Act refers to incomes which do not form part of the total income. Chapter VI-A provides for certain deductions which are required to be made in computing total income. However, section 36(1)(viii) of the Act provides that deduction admissible under that provision has to be calculated on the basis of total income computed before making any deduction under Chapter VI-A of the Act. In view of this provision, it would not be permissible for the assessing authority, as held in CIT v. Bihar State Financial Corporation [1983] 142 ITR 518 (Patna), to find out what would be the total income after making the deduction admissible under section 36(1)(viii) of the Act and then limit the amount of deduction to 40 per cent. of the total income, as reduced by the deduction under section 36(1)(viii) of the Act. In our opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be given effect to and if the construction as suggested by the assessee is accepted, it would really amount to legislation in the guise of interpretation which is plainly impermissible. The view of the Karnataka High Court is also that the amendment effected in the Finance Act, 1985, and the object with which the same has been amended, far from supporting the case of the assessee, supports the case of the Revenue. The Karnataka High Court observed that the view taken by the Patna High Court in Bihar State Financial Corporation [1983] 142 ITR 519 is not sound. The question is whether the view expressed by the Tribunal is correct or not. It is no doubt true that, in a taxing statute, one has to look merely at what is clearly said : there is no room for any intendment; there is no equity about a tax ; nor is there any presumption as to tax. One has to look fairly at the language used. As the section originally stood, no indication was given as to how the total income should be computed for the purpose of allowing the deduction under section 36(1)(viii). In 1967, the amendment was made which provided that the total income shall be computed before making any deduction under Chapter VI-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute or read words into it which are not there is not in consonance with the rule that the finding of proper implications within the express words of an enactment is a legitimate, indeed a necessary, function of the court. If Parliament had intended that the meaning given by the several High Courts on the construction of section 36(1)(viii) was not the intention of Parliament and any qualification should be added, it could easily have said so. It would have been simpler to give express effect to it. That was not done which only confirms the view that it was the intention of Parliament that deduction should be made on the total income as computed before allowing the deduction under section 36(1)(viii). We do not agree that the finding of the implications is an improper technique in interpretation. Willes J., said that the legal meaning of an enactment includes " what is necessarily or properly implied" by the language used (Chorlton v. Lings [1868] LR 4 CP 374 at page 387). (emphasis added). For the foregoing reasons, with respect, we are unable to agree with the view taken by the Karnataka High Court. The question in this reference is, therefore, answered in the affirmative a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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