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Section 36(1)(Viii) of the Income-tax Act, 1961 - Financial corporation, reserve created by - Application of provision For assessment year 1996-97, where assessee had claimed deduction under section 36(1)(viii) in respect of 'special reserve' created by assessee, even if reserve was transferred to 'provision for bad and doubtful debts account' before close of accounting year, assessee would not lose benefit of section 36(1)(viii ) [Assessment year 1996-97] [In favour of assessee] CIT v. Kerala Financial Corpn. [2008] 220 CTR (Ker.) 399 The condition for availing the benefit under section 36(1)(viii ), as it stood at the relevant time, was that a reserve fund should be created and that there was no dispute that such a fund was created. In the absence of any condition that it should be continued to be maintained, there is no warrant to think that the Legislature intended to confer the benefit of the provision only if it continued to maintain the reserve. In the absence of any expression indicating of such a requirement by the assessee and in view of the fact that such a requirement was made expressly clear by an amendment brought about by the Finance Act, 1997, it was to be held that any retrospective effect could not be presumed to be a condition for granting the benefit as per the provisions which stood prior to the amendment in question. Thus, for the assessment year 1996-97, where the assessee, had claimed deduction under section 36(1)(viii) in respect of 'special reserve' created by the assessee, even if reserve was transferred to the 'provision for bad and doubtful debts account' before the close of the accounting year, the assessee would not lose benefit of section 36(1)(viii). P.K.R. Menon for the Petitioner. JUDGMENT H.L, Dattu, CJ. : The Revenue is before us, being aggrieved by the orders passed by the Tribunal, Cochin Bench, in ITA No. 227/Coch/1999, dated 20th June, 2003. 2. The brief facts are-The assessee is Kerala Financial Corporation, established under the State Financial Corporation Act. It is engaged in the business of financing industries in the State. The assessment year is 1996-97. 3. The assessee, in the returns filed, had claimed for…

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