TMI Blog2018 (12) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... ails. Bonafides are accordingly examined with reference to statutory provision, which is required to be interpreted, and whether interpretation placed by assessee was plausible and could have been accepted. Where the explanation is not make belief and sham but genuine, the assessee would satisfy the requirement of Explanation 1 to Section 271(1)(c). This test and requirement is satisfied in the present case. Further, full and complete facts were clearly stated in the income tax returns. In our opinion, the assessee had acted bonafidely and were under a genuine belief that they were entitled to benefit of the said deduction - Decided against revenue - INCOME TAX APPEAL Nos. 625/2017, 636/2017, 642/2017, 667/2017, 672/2017, 673/2017 - - - Dated:- 28-8-2018 - MR SANJIV KHANNA AND MR CHANDER SHEKHAR, JJ. For The Appellant : Mr. Zoheb Hossain, Sr. Standing Counsel with Mr. Deepak Anand, Jr. Standing Counsel for Revenue For The Respondent : Mr. Rohit Jain and Mr. Aniket D. Agarwal, Advocates JUDGMENT SANJIV KHANNA, J. (ORAL): These appeals by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) assail the common order of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which particulars have been concealed. 6. In the context of the present case, we would like to first reproduce clause (viii) of Section 36(1) of the Act as applicable in the Assessment Years 2003-2004 to 2009-2010, which reads:- 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 and maintained by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility in India or by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the profits derived from such business of providing long-term finance (computed under the head Profits and gain of business or profession before making any deduction under this clause) carried to such reserve account: [***] Provided [***] that where the aggregate of the amounts carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of the profits derived from eligible business computed under the head Profits and gains of business or profession (before making any deduction under this clause) carried to such reserve account: Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. Explanation.-In this clause,- (a) specified entity means,- (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 agricultural and rural development bank; (v) a housing finance company; and (vi) any other financial corporation including a public company; (b) eligible business means,- (i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral development, development of infrastructure facility in India or construction of purchase of houses in India for residential purposes. Respondent-assessee bank has been allowed deduction under Section 36(1)(viii), post the amendment with effect from Assessment Year 2010-2011. 8. It is an accepted and admitted case that the respondent-assessee bank is a certified corporation specified in Section 4A of the Companies Act, 1956. 9. The respondent-assessee bank, it is accepted and admitted by the Revenue, was engaged in promotion and regulation of housing finance institution in the country and had provided re-finance support to financial institutions, banks, etc. for development of housing in India. They had also undertaken business of financing some projects, rural housing projects, etc. They had not, however, directly granted housing loans or long-term finance for housing to individuals. 10. The respondent-assessee bank, before filing its return for the Assessment Year 2003-04, had written letter dated 22nd October, 2002 to the Director ITA-2, Central Board of Direct Taxes with a request for issue of notification certifying that the respondent-assessee bank was eligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank is a body corporate having perpetual succession and a common seal with power, subject to the provisions of the Act, to acquire, hold and dispose of property and to contract and by that name, sue and be sued. The object with which the National Housing Bank (herein after referred to as NHB/ Bank for short] was established is to provide long term finance for construction and/or purchase of residential housing or residential township-cum-housing development or slum clearance projects. The entire capital of NHB is held by the Reserve Bank of India and the Bank is established as a SPV (Special Purpose Vehicle) for providing long term finance for residential housing in India. It provides long term housing finance through the Housing Finance Institutions, Scheduled Banks, State Co-operative agricultural and Rural development Banks etc as well as directly. The Bank was exempted from the payment of Income Tax by section 48 of the National Housing Bank Act, 1987. The section has been omitted with effect from 1st April, 2002. Section 36(1)(viii) of the Income Tax Act, 1961 provides a Special deduction of forty percent of the income derived from the business of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing was concealed or withheld. 15. Despite the aforesaid factual background and clear explanation given by the respondent-assessee bank to establish and show their bona fides, the Assessing Officer had initiated and levied penalty under Section 271(1)(c) of the Act in respect of Assessment Years 2003-04 to 2009-10. The reason was that the Assessing Officer did not accept the claim of the respondent-assessee bank in the quantum or assessment proceedings for deduction under clause (viii) to Section 36(1) of the Act. In the meanwhile, the respondent-assessee bank had continued to raise the issue with the Central Board of Direct Taxes. Consequently, clause (viii) of Section 36(1) was amended by Finance (No.2) Act of 2009 with effect from 1st April, 2010 to specifically enact and give benefit to the respondent-assessee bank engaged in re-financing of long-term finance for construction and purchase of houses in India. The said amendment obviously was enacted for the benefit of the respondent-assessee bank in view of different opinion expressed by the income tax authorities during the course of the assessment/quantum proceedings. Memorandum explaining the amendments made by Finance (N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be doubted or debated as advance tax was paid. There is no column of income tax returns whereby the assessee, in case of claim, can call upon Assessing Officer to decide and adjudicate claim for deduction. Provisions of Advance Ruling were not applicable. Therefore, to claim any benefit of any deduction, a claim is required to be made in the return with full particulars and details. 19. It is in this context that we have to examine the bona fide of the claim made in return for benefit under Section 36(1)(viii) of the Act. Bona fides are accordingly examined with reference to statutory provision, which is required to be interpreted, and whether interpretation placed by assessee was plausible and could have been accepted. Where the explanation is not make belief and sham but genuine, the assessee would satisfy the requirement of Explanation 1 to Section 271(1)(c) of the Act. This test and requirement is satisfied in the present case. Further, full and complete facts were clearly stated in the income tax returns. In our opinion, the respondent-assessee had acted bonafidely and were under a genuine belief that they were entitled to benefit of the said deduction. Appropriate fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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