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JUDGMENT A.K. Menon, J. - The above appeals raise the following common questions of law : "(a) Whether on the facts and in the circumstances of the case and in law the Tribunal was right in quashing the order of the Commissioner of Income Tax passed u/s. 263 of the Income Tax Act ? (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that two views are possible with regard to the applicability of Section 36(1)(viii)read with Section 41(4A) even though the provisions of Section 36(1)(viii) as amended with effect from 1/4/1997 do not provide any room for interpretation other than the one adopted by the Commissioner of Income Tax in his order passed u/s.263 of the Income Tax Act ?" 2. These appeals are filed by the revenue pertaining to assessment years 2003-04 and 2004-05 respectively. The common issue that arises pertains to the provisions of Section 36(1)(viii) of the Income Tax Act in terms of which a special reserve could be created by the Respondents out of the profits of the company. The special reserve in the present case relates to financial year 1996-97. The Respondents are in the business of housing finance and they claimed deductions in sums of Rs.10 crores and Rs.25 crores in the assessment year 2003-04 and 2004-05 respectively. The special reserve fund was created under section 36(1)(vii) of the Act as applicable and amounts transferred to special reserve were exempted from tax at the material time. When the amounts were transferred to the special reserve section 36(1)(viii) read as under : "(viii) 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 or by a public company formed and registered in India with the main object of carrying on the business of providing long- term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the total income (computed before making any deduction under this clause) and carried to such reserve account. Provided that the corporation or, as the case may be, the company) is for…

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