Judgment 1. A statement of the case under Sec.256(1) of the Income-tax Act, 1961, has been submitted by the Income-tax Appellate Tribunal, Patna Bench "B" in R.A. Nos, 130, 203 and 204 (Pat) of 1975-76 for the assessment years 1970-71, 1971-72 and 1972-73, and the following question of law has been referred to this court for its opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that the allowance for special reserve under Section 36(1)(viii) should be calculated at 25% of the total income computed before the allowance of the special reserve itself ?" 2. A consolidated statement of the case has been framed and submitted to this court for all the three assessment years in question. The facts that emerge from the statement are these. In the assessment year 1970-71, the Income-tax Officer, while completing the assessment of the Corporation, allowed a sum of Rs. 2,01,681 as admissible deduction under Sec.36(1)(viii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), as against the claim of the assessee at Rs. 2,58,320 which had been transferred to a special reserve account. The allowance by the Income-tax Officer was calculated with reference to the business income of the Corporation after allowing the said special allowance of Rs. 2,01,681. The Income-tax Officer had included interest on securities at Rs. 25,087 and had determined the total income of the Corporation at Rs. 8,31,812. A copy of the order of the Income-tax Officer has been marked annexure A to the statement of the case and forms part of the same. 3. Before the Appellate Assistant Commissioner, it was contended on behalf of the Corporation that the special reserve of 25% should be calculated on all the incomes taken together and not only the business income of the Corporation. It was also submitted that the allowance of special reserve had to be computed at 25% of the total income before allowing deduction in respect of the said special reserve. According to the Appellate Assistant Commissioner, the total income was definite and had to be computed after allowing all the deductions except those which are given in Chapter VI-A of the Act. As the deductions under Sec.36 were not covered by Chapter VI-A, the Appellate Assistant Commissioner was of the view that they had to be deduced for arriving at the total income. As the deductions under Sec.36 were not covered by Chapter VI-A, the Appellate Assistant Commissioner was of the view that they had to be deduced for arriving at the total income. The Appellate Assistant Commissioner further considered the order of the Tribunal as not applicable to this year in view of the amendment brought about in the Act. He, therefore, held that the special reserve had to be calculated after allowing the deduction for special reserve. He, however, accepted the second contention regarding the inclusion of interest on securities for the purpose of calculating special reserve. A copy of the order of the Appellate Assistant Commissioner has been marked annexure I and forms part of the statement of the case. 4. When the matter came up before the Appellate Tribunal, the judgment of this court in the case of the assessee for the assessment year 1965-66 was available which had been registered as Tax Case No. 96 of 1971--since reported as CIT v Bihar State Financial Corporation [1983] 142 ITR 519. This court accepted the plea of the assessee that the special reserve had to be allowed on the basis of total income computed before allowing the deduction for special reserve. Regarding the amended provisions, the High Court was of the opinion that the amendment strengthened the interpretation which the Corporation wanted the court to put on the provisions. On behalf of the Revenue, it was submitted that the deduction provided in Sec.36 had to be made before arriving at the total income. The Tribunal considered the arguments and held as follows : "We have considered the facts of the case and we are of the view that the decision of the Hon ble High Court is very clear and in view of their observations regarding the amended provisions, no change can be made in this year in principle. In this connection, it may be pointed out that the amendment was made in 1963 as a new Chapter VI-A was added in the Income-tax Act and in place of the rebate, which were allowed in certain circumstances, the new provisions provided for straight deduction. Thus, while under the provision before the amendment, the total income used to be a larger figure, rebates had to be allowed on various items. Thus, while under the provision before the amendment, the total income used to be a larger figure, rebates had to be allowed on various items. After the amendment, however, the total income itself undergoes a reduction, as the law now provides for a straightaway deduction in the computation of the total income. This would have reduced the quantum of benefit which was available to the State Financial Corporation, but it was not the intention of the Legislature to do so. It was, therefore, provided that the total income for this purpose was to be computed before making the deduction under Chapter VI-A. Thus, the Legislature has maintained the benefit which was available to the State Financial Corporation before the amendment. There has been, however, no change regarding the basis of calculation of the reserve in any other respect. In view of this, the principles laid down by the Lordships of the Patna High Court would apply to this case also. Respectfully following their Lordships, we direct that the allowance for the special reserve should be calculated at 25% of the total income before the allowance of the special reserve itself." 5. On these facts, the Commissioner has suggested the following question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that the allowance for special reserve under Section 36(1)(viii) should be calculated at 25% of the total income computed before the allowance of the special reserve itself ?" 6. That question of law has been referred for opinion of this court in so far as the assessment year 1970-71 is concerned. Similar view was taken by the Department in the assessment years 1971-72 and 1972-73. The Appellate Assistant Commissioner, following the decision of the High Court, upheld the claim of the assessee and held that the deduction referred to under Sec.36(1)(viii) envisages deduction at the prescribed percentage of the total assessed income and not the prescribed percentage of the total assessed income after deduction of the amount so allowed. The Appellate Tribunal confirmed the orders of the Appellate Assistant Commissioner by following the decision of this court. The Appellate Tribunal confirmed the orders of the Appellate Assistant Commissioner by following the decision of this court. The orders of the Income-tax Officer have been made annexures P and P1, respectively, and the consolidated order of the Appellate Assistant Commissioner has been made annexure Q and the consolidated order of the Tribunal has been made annexure R and they form part of the statement of the case. On these facts, the aforesaid question of law has been referred to this court for its opinion. Having gone through the judgment of this court in Tax Case No. 96 of 1971 (CIT v. Bihar State Financial Corporation [1983] 142 ITR 519) disposed of on July 19, 1974, we see that the view taken by the Tribunal is fully justified on the facts and in the circumstances of the case. 7. It is true that Sec.36(1)(viii) was amended and a slight change was made in Clause (b) of Sec.36(1)(viii) by sections and Chapter III of the Finance (No. 2) Act of 1971, with effect from April 1, 1968. By the amendment brought about by the Finance (No. 2) Act, 1967, effective from April 1, 1968, only after the term "total income" has been inserted "(computed before making any deduction under Chapter VI-A)". This is neither here nor there. The following Explanation was inserted by the Finance Act, 1970, with effect from 1st April, 1966, which was omitted by the Finance Act, 1974, with effect from 1st April, 1975. The Explanation reads thus : "Explanation,--For the removal of doubts, it is hereby declared that in the case of a financial corporation to which Sub-clause (a) applies, if the amount carried to the reserve account referred to in this clause in the accounts of the previous year relevant to the assessment year commencing on the 1st day of April, 1966, falls short of twenty-five per cent. of the total income and the amount transferred to such reserve account in the accounts of the immediately succeeding previous year exceeds the amount in respect of which the corporation is entitled to the deduction under this clause for the assessment year commencing on the 1st day of April, 1967, an amount equal to such excess shall, for the purpose of allowing the deduction under this clause, be deemed to have been transferred to the reserve account in the accounts of the first-mentioned previous year". 8. 8. The portion, after its amendment by the Finance Act of 1966 with effect from April 1, 1966, stood as under excepting for the words in parenthesis and in italics : "in respect of any special reserve created by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development in India, an amount not exceeding-- (a) in the case of a financial corporation whose paid-up share capital does not exceed three crores of rupees, twenty five per cent., (b) in the case of any other financial corporation, ten per cent., of the total income (computed before making any deduction under Chapter VI-A) carried to such reserve account." 9. After the amendment was brought about by the Finance (No. 2) Act of 1967, omitting the main portion of Sub-section (1) of Sec.36 of the Act, the amended Clause (viii), without the two provisos, the relevant portion reads as follows : "(viii) in respect of any special reserve created by a financial corporation which is engaged in providing long-term finance for industrial development in India, an amount not exceeding : (a) in the case of a financial corporation whose paid-up share capital does not exceed three crores of rupees, twenty five per cent., (b) in the case of any other financial corporation, ten per cent., of the total income (computed before making any deduction under Chapter VI-A) carried to such reserve account." 10. This amendment has already been taken into consideration in our previous judgment and it has been held that the amendment on which the Revenue sought to rely strengthened the interpretation which the assessee wanted the court to put on the relevant provision. The first portion of the amendment which was brought about by the Finance Act, 1966, is not very relevant for our purpose. The words in parenthesis were inserted by the Finance (No. 2)Act, 1967, with effect from April 1, 1968. Learned counsel for the Revenue relied upon this amendment where the words in parenthesis were inserted by the Finance (No. 2) Act of 1967, with effect from April 1, 1968, to rely upon his submission in support of the Revenue that this amendment had brought about a substantial change. Unfortunately for the Revenue, the Bench of this court deciding Tax Case No. 96 of 1971 CIT V/s. Bihar State Financial Corpn. Unfortunately for the Revenue, the Bench of this court deciding Tax Case No. 96 of 1971 CIT V/s. Bihar State Financial Corpn. [1983] 142 ITR 519, had taken special care and great pains not only to refer to but also to consider the effect of the amendment in question and it was held thus [1983] 142 ITR 519 at p. 524 : "After this amendment, it is clear that the expression total income occurring in Clause (viii) cannot mean the total assessed income. For the purpose of determining the maximum limit of allowable deduction in Clause (viii), the figure of total income computed before making any deduction under Chapter VI-A has got to be taken. In such a situation, will it be reasonable to say that the total income must be the total assessed income plus the amount of deduction allowable under Chapter VI-A of the Act ? It would thus be seen that if the interpretation which is sought to be put by the Department on the expression total income is accepted, then the amended provisions would be wholly otiose and inept ; but it would not be so, rather it would be consistent and in consonance with the earlier Act, if the interpretation sought to be put on behalf of the corporation is accepted to be correct." 11. The judgment of this court squarely covers the point and the submission made by Mr. Rajgarhia, learned counsel for the Revenue, is rejected in view of our decision in that case. 12. Thus, the question referred to us is answered in the negative, in favour of the assessee and against the Revenue. In the circumstances of the case, there shall be no order as to costs.