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TMI Blog1974 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount so allowed? " The assessee in this case is the Bihar State Financial Corporation (hereinafter referred to as " the Corporation ") established by the State Govt. under s. 3 of the State Financial Corporations Act, 1951 (Central Act LXIII of 1951). The ITO by his first assessment order dated the 27th of November, 1965, assessed the total income liable to tax to the tune of Rs. 7,74,835. According to the profit and loss account of the Corporation, it had earned a net profit to the tune of Rs. 8,17,451. It had transferred 10% of this sum to the extent of Rs. 81,745 to the special reserve fund. The ITO allowed the whole of this amount as admissible deduction under s. 36(1)(viii) of the Act in order to arrive at the total assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The AAC did not: accept the stand of the assessee and affirmed the revised order of assessment. On second appeal by the Corporation, the Tribunal has held the revised order to be incorrect and bad and set it aside. On being asked to refer case, it has done so on the question of law stated above. The point for determination presented some difficulty, but on a careful consideration of the matter and for the reasons to be recorded hereinafter in this judgment, I have arrived at the conclusion that the view taken by the Tribunal is correct and not erroneous in law. The assessment year in question is 1965-66, and the law which was applicable was before cl. (viii) of sub-s. (1) of s. 36 of the Act was amended by the Finance Act of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 36. (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 development in India, an amount not exceeding ten per cent. of the total income carried to such reserve account : Provided that the corporation is for the time being approved by the Central Government for the purposes of this clause: Provided further that where the aggregate of the amounts carried to such reserve account from time to time exceeds the paid-up share capital (excluding the amounts capitalised fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the process of computing the income all additions which can justifiably be made should be made; all deductions which are permissible to be allowed should be deducted. Then comes a figure of total income at a stage where the ITO proceeds to give a further deduction under s. 36(1)(viii) of the Act. Should he at that stage, while computing the income, by a circuitous method, find out what would be the total taxable income after making the deduction and then limit the amount of deduction to one-tenth of such income; or, while computing the income, is it permissible for him to proceed straight, and allow one-tenth of the total income determined at the stage where he has exhausted his power of making additions and deductions and then all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpret the clear terms of an earlier Act which the later Act does not amend, even although both Acts are to be construed as one, unless the later Act expressly interprets the earlier Act : but if the earlier Act is ambiguous, the later Act may throw light on it, as where a particular construction of the earlier Act will render the later incorporated Act ineffectual." At p. 147 a passage has been quoted from the judgment of Lord Sterndale M. R. in the case of Cape Brandy Syndicate v. IRC [1921] 2 KB 403; 12 TC 458 (CA), which emphasises that if there was any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier. In John Walsh Ltd. v. Sheffield Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income " occurring in cl. (viii) cannot mean the total assessed income. For the purpose of determining the maximum limit of allowable deduction in cl. (viii), the figure of total income computed before making any deduction under Chap. VI-A has got to be taken. In such situation, will it be reasonable to say that the total income must be the total assessed income Plus the amount of deduction allowable under Chap. VI-A of the Act ? It would thus be seen that if the interpretation which is sought to be put by the Department on the expression " total income " is accepted, then the amended provisions would be wholly otiose and inept; but it would not be so, rather it would be consistent and in consonance with the earlier Act, if the interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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