TMI Blog1985 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act, 1961 (Central Act 43 of 1961) ("the Act"), the Income-tax Appellate Tribunal, Bangalore Bench, Bangalore ("the Tribunal"), at the instance of the assessee, has referred the following question of law for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the assessee is entitled for deduction under section 36(1)(viii) of 2/7ths of Rs. 51,29,454 as held by the Tribunal or 40% of the same, as claimed by the assessee ?" In order to appreciate the question referred to us, it is necessary to notice the facts that are not in dispute in the first instance. For the assessment year 1975-76, relevant to the accounting year ending on March 31, 1975, the assessee, a financial corporation, est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reversed the order of the Appellate Assistant Commissioner and restored the order of the Income-tax Officer. Hence, this reference. Sri T.V. Natarajan, learned advocate of the Madras Bar, assisted by Sri Kalimulla Sheriff of Bangalore Bar, appeared for the assessee ; Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, assisted by Sri H. Raghavendra Rao, junior standing counsel, appeared for the Revenue. Sri Natarajan has urged that the construction placed by the Tribunal on the term "total income" occurring in the Act vis-a-vis the special reserve created by the assessee was erroneous and unsound and the question must be answered in the negative and in favour of the assessee. Sri Srinivasan has urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'X' be the amount deductible under section 36(1)(viii), 'T' the total income (before making any deduction under Chapter VI-A), and 'Y' the amount of what we might call the gross total income before deductions under Chapter VI-A and also before deduction under section 36(1)(viii). Then, according to the view we have taken above: X = 40% of T = (2/5)*T T + X = Y Therefore T + (2/5)*T = Y i.e., (7/5)*T = Y Hence T = (5/7)*Y Thus, X = (2/5)*T = (2/5) x (5/7)*Y = (2/7)*Y The above calculation would show that once the total income is computed before making any deduction provided for under Chapter VI-A and also before making the deduction under section 36(1)(viii), the deduction under that section would be 2/7ths of the amount so arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development in India, an amount not exceeding (a) in the case of a financial corporation or a joint financial corporation established under the State Financial Corporations Act, 1951 (63 of 1951 ), or an institution deemed under section 46 of that Act to be a financial corporation established by the State Government for the State within the meaning of that Act, forty per cent. . . . of the total income (computed before making any deduction under Chapter VI -A) carried to such reserve account." Section 36 of the Act at one place provides for other deductions in respect of the specific matters dealt therein in computing the income referred to in section 28 of the Act. Section 36 of the Act groups the deductions at one place. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax", at para 106, thus. " 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 India for residential purposes are entitled to a deduction, in the computation of their taxable profits, of an amount not exceeding 40 per cent. of the total income carried to a special reserve. Under the existing provisions, the total income for this purpose is the total income as computed before making any deduction under Chapter VI-A. It is proposed to provide that the deduction shall be for an amount not exceeding 40 per cent. of the total income as computed before making any deduction under the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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