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TMI Blog1992 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the total income on which deduction under section 36(1)(viii) of the Income-tax Act, 1961, has to be computed must be calculated before deducting relief allowable under section 36(1)(viii)?" The background facts as culled out from the statement of the case are to the following effect : M/s. Industrial Promotion and Investment Corporation of Orissa Limited ( hereinafter referred to as " the assessee filed its return of income for the assessment year 1981-82. A net profit of Rs. 7,24,255 was declared. The assessee had created a reserve of Rs. 2,89,702. The Assessing Officer was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue moved for a reference under section 256(1) and, as aforestated, two questions have been referred to this court. For resolution of the dispute as to what would be the quantum of deduction, it is relevant to refer to section 36(1)(viii) of the Act as it stood at the relevant time. "36. Other deductions. - (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 -..... (viii) in respect of any special reserve created by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development in India or by a public company formed and registered in India with the main object of carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1981, with effect from April 1, 1982. The original Explanation which was inserted by the Finance Act, 1970, with effect from April 1, 1966, was omitted by the Finance Act, 1974, with effect from April 1, 1975. A new Explanation was inserted by the Finance Act, 1979, with effect from April 1, 1980. With effect from April 1, 1985, there has been an amendment by the Finance Act of 1985 ( Central Act No. 32 of 1985 ). The object of the amendment is set out in the memorandum explaining the provisions in the Finance Bill as follows : "106. Financial corporations engaged in providing long-term finance for industrial or agricultural development in India or public companies providing long-term finance for construction or purchase of houses in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of the relevant clause of section 36(1), an amount not exceeding forty per cent. of the total income computed before making any deduction under Chapter VI-A has to be deducted. The total income on which the deduction is admissible has to be the total income before making any deduction under Chapter VI-A of the Act only. We are, there fore, of the view that the Tribunal was justified in setting aside the order of the Commissioner passed under section 263 of the Act. It was right in holding that the deduction permissible under section 36(1)(viii) of the Act was to be calculated on the assessee's total income as it stood before the deduction allowable under section 36(1)(viii) of the Act. A view similar to ours has been expres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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