JUDGMENT
1. The Income Tax Appellate Tribunal, New Delhi has referred to following question of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion of this Court:
Whether on the facts and in the circumstances of the case, the I.T.A.T. was correct in law in holding that deduction under Section 36(1)(viii) should be regulated with reference to the total income computed before making any deduction under Section 36(1)(viii) of the Income Tax Act, 1961 ?
The reference relates to the assessment years 1983-84 and 1984-85.
2. Briefly stated, the facts giving rise to the present reference are as follows:
Respondent-assessee (hereinafter referred to as the "assessee") is a Government Corporation incorporated under State Financial Corporation Act, 1951 in the year 1953. The affairs of the company are managed by Government Officials acting as its Managing Directors under the supervision of Board of Directors consisting of some Government Officers and some other persons.
3. For the assessment years 1983-84 and 1984-85 returns showing total income of Rs. 86,68,084 and Rs. 92,98,680 were filed on 29-7-1983 and 30-7-1984 respectively. The assessee had claimed deduction under Section 36(1)(viii) of the Income Tax Act on the basis of 40 per cent of the gross total income. According to the assessee, the gross total income mean total income before allowing deduction under Chapter VI-A of the income-tax Act. The assessment for the assessment year 1983-84 was completed on 25-3-1985 on a total income of Rs. 1, 19,63,703 and the assessment for the assessment year 1984-85 was completed on 22-12-1987 on a total income of Rs. 1, 11,36,400. In these assessments, the I.A.C. (Assessment), Range-II, Kanpur, allowed deduction under Section 36(1)(viii) at the rate of 40 per cent on total income computed before making any deduction under Chapter V-A but after allowing deduction under Section 36(1)(viii) of the Act.
4. Being aggrieved, the assessee went in appeal to the Commissioner (Appeals), who vide his orders dated 27-2-1989 for the assessment year 1983-84 directed that the relief under Section 36(1)(viii) should be allowed to the appellant on the principle settled in the appellate order dated 25-11-1987 passed by his predecessor in the case of the appellant company, in the order dated 27-2-1989 for the assessment year 1984-85, following the appellate order for assessment years 1982-83 and 1983-84, the assessing officer was directed to allow deduction under Section 36(1)(viii) on the whole of total income without deducting allowance under Section 36(1)(viii) of the Income Tax Act.
5. The department preferred appeals against the said orders of the learned Commissioner (Appeals). The Tribunal vide its orders dated 20-7-1995 in I.T.A. Nos. 969 and 970 (All) of 1989, following its own decision in I.T.A. Nos. 1316 (All) of 1982 and 1374 (All) of 1982 dated 19-1-1984 and I.T.A. No. 1039 (All) of 1982 endorsed the view of the learned Commissioner (Appeals) that the deduction under Section 36(1)(viii) is to be regulated with reference to the total income computed before making any deduction under Section 36(1)(viii) of the Income Tax Act. The departmental appeals were dismissed.
6. We had heard Sri A.N. Mahajan, learned standing counsel for the revenue. No body has appeared for the respondent-assessee.
7. We find that the question raised hereinabove is squarely covered by the decision of Apex Court in the case of CIT v. Kerala State Industrial Development Corpn. 1998 233 ITR 1971. In the aforesaid case, Apex Court has held that in computing the total income for the purpose of Section 36(1)(viii) of the Act, the total income has to be computed in accordance with the provisions of sections 30 to 43A except Section 36(i)(viii) of the Act.
8. Respectively following the decision of the Apex Court we answer the question referred to us in affirmative, i.e., in favour of the assessee and against the revenue. There shall be no order as costs.
There shall be no order as costs.