TaxTMI 
TaxTMI 
2013 (1) TMI 260
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.... was allowed u/s 36(1)(viii) on reserve created by an assessee from the business of providing long term finance for construction of residential houses. (ii) deduction of Rs.3092.12 lakhs being fees income, Rs.464.04 lakhs of miscellaneous income being lease rentals, interest of Income-tax refund of Rs.70.71 lakhs, are not income from long term finance for construction of residential house and do not qualify for deduction u/s 36(1)(viii). (iii) Expenses debited as interest and other financial charges include Rs.3,43,24,768/- bond issue expenses, which are capital in nature. The learned CIT accordingly issued a notice u/s 263 on 21-04-2009 requiring the assessee to explain why the order of the AO passed u/s 143(3) should not be revised u/s 263 in view of the aforesaid errors. 3. In reply to the notice issued by the learned CIT u/s 263, the following submissions were made on behalf of the assessee in writing : "During the course of assessment, it was submitted that 1-HFC has discontinued the business of giving fresh housing loans and the same are disbursed by ICICI Bank. However, we would like to draw your Honour's attentio....
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....16% of above income) 5,88,44,212 Profit from long term finance 30,89,32,113 Special reserve deduction @40% 12,35,72,845 Amount appropriated to special reserve 10,90,00,000 Deduction allowed under section 36(1)(viii) 10,90,00,000 In view of the aforesaid, your Honour would appreciate that the assessment order passed under section 143(3) of the Act allowing the deduction under section 36(1)(viii) at Rs.10,90,00,000 is neither erroneous nor prejudicial to the interests of the revenue and thus does not come within the purview of section 263 of the Act. Issue Bond Expenses 1-HFC had issued bonds in March 2004 and had redeemed the same in March, 2005. The expenses of R.3,43,24,768 incurred on the same have been Investment Corporation Limited vs. CIT (225 ITR 802) has held that discount on debentures issued is an allowable revenue expenditure. Thus the claim made by 1-HFC in return of income is correct and the assessment order passed is neither erroneous nor prejudicial to the interests of the revenue." The learned CIT did not find merit in the above submissions made on behalf of the assessee. According to him, the asse....
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....ng and servicing home loans for ICICI Bank". She also invited our attention to para 4 of the said return placed at page No. 38 and 39 of her paper book wherein entire details of housing loans given by the assessee company to individuals were given along with disbursement made during the year under consideration. She submitted that there were no housing loans given by the assessee through ICICI Bank and the assessee company had only rendered services in connection with home loans for which fees was separately received amounting to Rs.30.92 crores. She contended that the assessee thus was very much engaged in the business of providing long term finance for construction of residential house during the year under consideration making it entitled for deduction u/s 36(1)(viii) and there was no error in the order of the AO allowing the said deduction. As regards the allowability of deduction u/s 36(1)(viii) in respect of income by way of fees amounting to Rs.30.92 crores received from ICICI and miscellaneous income of Rs.4.64 crores, she submitted that the fees received from ICICI was in connection with servicing of housing loans and the same, therefore, was eligible for deduction u/s 36(....
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....s.197.82 crores was received by the assessee during the year under consideration of which major amount was relating to housing loans given to the individuals and corporate. A copy of return filed by the assessee to NHB is also placed on record before us at page No. 31 to 40 of the assessee's paper book and a perusal of the same shows that the principal business transacted by the assessee company during the year under consideration was clearly indicated as financing housing loans and sourcing and servicing home loans for ICICI Bank. The details of disbursement of housing loans during the year under consideration were also given in part 4.1 of the said return placed at page No. 39 of the paper book which shows that 709 new housing loans were disbursed by the assessee during the year under consideration involving total amount of Rs.15.06 crores. In our opinion, all these facts and figures of the assessee's case are sufficient to show that it was very much carrying on the business of providing long term finance for development of housing in India making it entitled for deduction u/s 36(1)(viii) and there was no error in the order of the AO in allowing such deduction to the assessee in ....