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2022 (10) TMI 552 - HC - Income TaxDeduction u/s 36(1)(viii) - long term finance for agricultural and industrial development - AO declined to allow the deduction on the ground that notification declaring the assessee as a financial institution was issued on 23.02.2004, which fell in the subsequent year - Assessee in computation of the income has claimed deduction contending that it has provided long term financing for agricultural development and therefore eligible for deduction under section 36(1)(viii) of the Act to the extent of profit derived from such activities subject to creation of special reserve - HELD THAT:- In determining the liability of a subject to tax, regard must be had to the strict letter of law and if the revenue would satisfy the Court that case falls strictly within the provisions of the law, necessarily the assessee has to be taxed. In interpreting the Taxing Statute, equitable construction are entirely out of place. The Court would look into the words of Statute and interpret them. Taxing Statute cannot be interpreted on any presumption or assumptions. It cannot import the provisions in the Statute so as to supply any assumed deficiency. It is trite law that exemption notification is to be read strictly and burden is on the assessee to prove that item falls within the four corners of such exemption notification. An exemption notification should be given a liberal meaning. Recourse to other principles or cannons of interpretation of Statute would be resorted to only in the event of the same giving rise to anomaly or absurdity. The exemption given under the notification or Statute must be construed having regard to the purpose and object sought to be achieved. Insofar as the contention of assessee that section 35C also provided for allowing deduction, the amount of expenditure relatable to “agricultural development” and the expression used in section 36(1)(viii)(b)(i)(A) requires to be considered for the purposes of outright rejection, inasmuch as the very provision namely section 35C itself provides that where any Company or a co-operative society is engaged in the manufacture or processing of any article or thing which is made from, or uses in such manufacture or processing as raw material, any product of agriculture, animal husbandry, or diary or poultry farming, and has incurred after the 29th day of February, 1968 [but before the 1st day of March, 1984], whether directly or through an association or body which has been approved for the purposes of this section by the prescribed authority, any expenditure in the provision of any goods, services or facilities specified in clause (b) to a person (not being a person referred to in clause (b) of sub-section (2) of section 40A) who is a cultivator, grower or producer of such product in India, the company (or co-operative society) shall, subject to the provision of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year. Whereas said provision pressed into service would not include or extend to the expression or phrase “Industrial or agricultural development” by taking within its sweep the dairy or animal husbandry activity. Contention raised by assessee cannot be accepted. Hence, we are of the considered view that providing long term finance for industrial or agricultural development to various diary cooperations cannot be covered as long term finance extended for agricultural or industrial development. Decided in favour of revenue. Deduction on account of payment of gratuity u/s 43B - amount was contributed to NDDB employees group gratuity cum life assurance scheme and as such claimed deduction - assessee was awaiting the approval and non approval does not amount to ‘non recognition’. Hence, it was contended that in terms of section 43B(b) - HELD THAT:- A mere intimation is to be made in absence of any withdrawal of earlier approval, at this stage, we may state that for long period of 15 years, scheme remained inoperative, without continuance of approval and when we see communications which are sought to be relied upon clearly indicate that even assessee was also in clear understanding about the requirement of approval. In no uncertain terms, said communications dated 23.9.2003, 1.4.2004, 12.4.2004 and 17.8.2004 indicate that it is the appellant – assessee who submitted deed of variation on 23.9.2003 onwards and sought specific approval. Not only this communication dated 23.9.2003 but subsequent reminders also clearly suggest that what has been sought for is approval and as such, the assessee itself was conscious about the situation of seeking approval. As a result of this, a conjoint effect of sequence of events, as stated above, and in view of the literal meaning of relevant provisions, we are of the considered opinion that no error is committed by the authorities below in disallowing deduction sought for by the assessee and as such, we hereby answer the substantial question No.(F) in favour of the revenue.
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