1997 (11) TMI 70

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....al income of Rs. 4,10,25,778. Under the provisions of section 36(1)(viii) financial corporations engaged in providing long-term finance for industrial or agricultural development in India are entitled to a deduction in the computation of their taxable profit of the amount transferred by them out of such profits to a Special Reserve Account, up to a specified percentage of their total income as computed before making any deduction under Chapter VI-A of the Income-tax Act, 1961. The deduction is available only where the financial corporation is approved by the Central Government for the purposes of this section. The question whether the specified percentage of rate is to be applied to the total income (computed before making any deduction und....

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....hat the specified percentage of deduction under section 36(1)(viii) should be given on the total income which should be worked out before making any deduction under Chapter VI-A and without making any deduction under section 36(1)(viii). The claim has been turned down by the Income-tax Officer, also by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal forming an opinion that deduction under section 36(1)(viii) cannot be allowed for working out the total income for the purpose of deduction under section 36(1)(viii). The Tribunal also formed an opinion that the circular dated November 12, 1973, had to be disregarded because it was not in accordance with the provisions of section 36(1)(viii). On an application f....

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....] 174 ITR 206. The view taken by the High Court of Karnataka is that while calculating the income, it was not permissible to make an exception in respect of the deduction under section 36(1). The decision of the Karnataka High Court has been referred to by the Calcutta High Court for the purpose of dissenting therefrom. The Calcutta High Court has referred to the decisions of the Patna, Andhra Pradesh and Madhya Pradesh High Courts taking a view to the contrary and concluded as under (headnote of [1993] 203 ITR 422) : "As section 36(1)(viii) of the Income-tax Act, 1961, originally stood, no indication was given as to how the total income should be computed for the purpose of allowing the deduction under the section. In 1967, an amendm....