Law: Income Tax Act, 1961

Section: 36

(a) Income-tax-----Financial Corporation---Deduction in respect of special reserve---Deduction under S.36(l)(viii) must be allowed before making deductions under Chapter VI-A and also before taking into account deduction allowable under S.36(1)(viii)---Indian Income Tax Act, 1961. (b) Income-tax---Business expenditure---Amounts representing discount on bonds and debentures---Deductible---Indian Income Tax Act, 1961, S.37. (c) Income-tax--- ----Income---Accrual of income---Interest---Mercantile system of accounting---interest on "sticky loans" --Suits filed for recovery of amount with interest---Order of remand by Tribunal to make additions of interest which had actually accrued---Order-of Tribunal valid. Held, that the deduction under section 36(1)(viii) of the Income Tax Act, 1961, should be allowed at the prescribed percentage of the total income computed before making deduction under Chapter VI-A and also before taking into account the deduction allowable under section 36(1)(viii) itself. CIT v. Himachal Pradesh Financial Corporation (1998) 232 ITR 138 (HP) fol. It is not necessary for the assessee to make out a case of actual expenditure before claiming allowable deduction under the provisions of section 37 of the Act. The amounts representing discounts on bonds was deductible. M.P. Financial Corporation v. CIT (1987) 165 ITR 765 (MP) fol. It was admitted that the accounts were being maintained on mercantile basis by the assessee. Hence, it was not necessary for the Department to consider whether the interest had been actually received by the assessee during the year in question or not. It could be decided on the basis of accrued interest. It was stated that several suits were pending and during the pendency of the suits the assessee would not be in a position to ascertain the interest which might be ultimately allowed by the Court. The Tribunal had remanded the matter to the assessing Authority for fresh decision on the quantum regarding addition to be made in each year. The order passed by the Tribunal was valid. CIT v. Indian Jute Mills Association (1982) 134 ITR 68 (Cal.); CIT v. Madras Industrial Investment Corporation Ltd. (1980) 124 ITR 454 (Mad.);…

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