Public financial institution status supported deduction claims under sections 36(1)(viia) and 36(1)(vii); disallowance deleted.

Assessee engaged in advancing loans and in taking share capital participation in industrial concerns for industrial development was treated as a public financial institution meeting the guideline requirements under section 4A of the Companies Act, 1956. On that basis, and noting consistent acceptance of the claim in earlier assessment years, the disallowance of deduction under section 36(1)(viia) and section 36(1)(vii) of the Income-tax Act, 1961 was found unsustainable. The assessee was held entitled to both deductions, and the disallowance was deleted.

---

---

Issues: Whether the assessee was entitled to deduction under section 36(1)(viia) and section 36(1)(vii) of the Income-tax Act, 1961.

Analysis: The assessee was found to be engaged in advancing loans and participating in the share capital of industrial concerns for industrial development, and was treated as a public financial institution satisfying the guideline requirements under section 4A of the Companies Act, 1956. The claim had also been accepted consistently in earlier assessment years. On these facts, the disallowance of the deduction was held to be unsustainable.

Conclusion: The assessee was held entitled to the deduction under section 36(1)(viia) and section 36(1)(vii), and the disallowance was deleted.

---