JUDGMENT
P.R. Raman, J.
1. The appellant is the Kerala Financial Corporation. The asst. yr. is 1994-95.
2. The assessee was assessed on a total income of Rs. 1,04,38,220 for the asst. yr. 1994-95. While making the assessment under Section 143(3) of the IT Act, the assessee claimed deduction of an amount of Rs. 70,04,148 under Section 36(1)(viii) which was allowed in respect of the special reserve created by the appellant/assessee as a Financial Corporation engaged in providing long-term finances. The CIT, on a perusal of the records noticed that though reserve was created to the extent of Rs. 71,18,786 by the assessee by debiting the P&L a/c, the amount was transferred immediately to the ‘Provision for bad and doubtful debts account’ and that there was no amount available in the special reserve account. In this view of the matter, the CIT was of the opinion that the assessee was not entitled to the deduction under Section 36(1)(viii) of the IT Act since the amount from the special reserve has been transferred to another account leaving no amount in the reserve as such. A notice was issued under Section 263 of the IT Act to the assessee proposing revision of the assessment. Though the assessee objected to the proposal, the same was overruled and by order, dt. 25th Nov., 1998, passed under Section 263 of the IT Act, the CIT directed the AO to withdraw the deduction granted under Section 36(1)(viii) of the Act. Against the said order, the appellant-assessee preferred an appeal before the Tribunal. The Tribunal also concurred with the view of the CIT and dismissed the appeal by its order in ITA No. 558/Coch./1998, dt. 24th Aug., 1999. Aggrieved thereby, the appellant has preferred this appeal, challenging the decision of the Tribunal confirming the view of the CIT.
3. The admitted facts are that the assessee financial corporation is constituted under the Kerala Financial Corporation Act and engaged in the business of providing long-term finances for industrial or agricultural development or development of infrastructure facility in India. The assessee has, for the asst. yr. 1994-95 created the reserve of an amount of Rs. 71,18,786 by debiting the P&L a/c and creating a special reserve account. But the assessee transferred the amount in the special reserve account to ‘provision for bad and doubtful debts-account’. The question that arises for consideration is as to whether in the facts and circumstances of the case, the appellant is entitled to the deduction of Rs. 70,04,148 created in the special reserve under Section 36(1)(viii) while computing the total income of the appellant for the asst. yr. 1994-95 ?
4. We have heard Sri G. Sarangan, senior counsel appearing for the appellant and Sri P.K. Raveendranatha Menon, senior standing counsel appearing for the respondent-Revenue. The learned counsel appearing for the appellant strenuously contended before us that there is no requirement that the reserve should not be disturbed at all and that if there was a creation of a reserve in the accounting year that is sufficient compliance with the requirement under Section 36(1)(viii). He drew our attention to the amendment made to Section 36(1)(viii) by Finance Act, 1997, w.e.f. 1st April, 1998, by which it was made clear that the special reserve is not only to be created but also to be maintained, According to him, the word “and maintained” was inserted for the first time w.e.f. 1st April, 1998, and as the section stood at the relevant point of time, there was no obligation nor was it a condition to claim the benefit of Section 36(1)(viii) to have the reserve created to be maintained by the assessee. In other words, the mere creation of a special reserve in its P&L a/c is sufficient to entitle the assessee to claim the benefit under Section 36(1)(viii) of the IT Act during the assessment year in question. It was also contended that the Industrial Development Bank of India had issued guidelines and as per the guidelines so issued and produced as Annexure E, the State Financial Corporation has been permitted to create special reserve to avail of the benefit as permissible in terms of Section 36(1)(viii) of the IT Act, 1961. The cumulative balance of provisions available/made under this section is admissible for provision purposes. The reserve can, therefore, be utilized to create specific provision for assets classified as ‘bad and doubtful debts’. The assets and liabilities should be reduced to the extent of provisions utilized from the cumulative balance of reserves under Section 36(1)(viii) i.e., to say, assets are to be shown as net of provisions. It is pursuant to these guidelines, contends appellant’s counsel, that the appellant had transferred from the special reserve to the provisions for ‘bad and doubtful debts’ and that provision continued to be remained in the books of account. In these circumstances, counsel submits, the deductions claimed under Section 36(1)(viii) is supported by law, justified and allowable.
5. The Tribunal, however, relying on the decision in Indian Overseas Bank v. CIT (1970) 77 ITR 512 (SC) rejected the contention of the appellant. Reliance placed by the Tribunal on the decisions in CIT v. Standard Motor Products of India Ltd. (1962) 46 ITR 814 (Mad) and Chembra Peak Estates Ltd. v. CIT (1972) 85 ITR 401 (Ker), according to him, is erroneous and the Tribunal has failed to take note of the insertion of Sub-section (4A) in Section 41 which was also simultaneously inserted w.e.f. 1st April, 1998, by the Finance Act, 1997, with the amendment to Section 36(1)(viii) of the IT Act. Thus, the cumulative effect of the amendment brought out to Section 36(1)(viii) and to Section 41 by inserting Sub-section (4A) to that section, it is submitted, the position is made abundantly clear that only with effect from the assessment year subsequent to the amendment made that the position changed in law and that the effect of the amendment is not applicable to the asst. yr. 1994-95 and the provisions are not made retrospective. According to him the amendment made is significant enough that the condition that the reserve fund should be maintained was inserted by the first time by Finance Act, 1997 and not before. Thus, since the condition was inserted only by Finance Act, 1997 and as the said section came into force only w.e.f. 1st April, 1998, according to the counsel, it cannot be made a condition for allowing the benefit under Section 36(1)(viii) for a period prior to the coming into force of the said amendment. He also placed reliance on Circular No. 763, dt. 18th Feb., 1998 reproduced in para 21.1–dealing with the reason for the amendment and the scope and effect of the amended provision. The same is extracted hereunder:
“21.1. Clause (viii) of Sub-section (1) of Section 36 permits the deduction of an amount not exceeding forty per cent of the profits derived from the business of providing long-term finance carried to any special reserve created by a financial corporation or a public company. The deduction is admissible provided that the corporation or the company is approved by the Central Government for this clause and the aggregate of the amounts carried over to the special reserve from time to time does not exceed twice the amount of paid-up share capital and general reserves. While this clause imposes a condition of creation of a special reserve, it does not impose any condition on the maintenance of the reserve.
21.2. In order to incorporate the condition regarding maintenance of the reserve, Clause (viii) has been amended by substituting the words ‘special reserve created’ with the words ‘special reserve created and maintained’. An amendment has been made in Section 41 in order to bring to tax any amount withdrawn from such special reserve in the year in which the amount is withdrawn. For this purpose, a new Sub-section (4A) has been introduced in this section, and a reference to this sub-section is also made in Sub-section (5) of this section.
21.3. This amendment will take effect from the 1st April, 1998, and will, accordingly, apply in relation to the asst. yr. 1998-99 and subsequent years.”
6. According to the learned counsel, the view of the ITO allowing the deduction under Section 36(1)(viii) on the abovesaid facts and circumstances of the case is therefore justifiable and the question has to be answered in favour of the assessee.
7. The learned counsel appearing for the Revenue, on the other hand, contended that though the word “and maintained” was inserted by an amendment made by the Finance Act, 1997 w.e.f. 1st April, 1998, even without such amendment, the position in law is that in order to claim the benefit under Section 36(1)(viii) it is not sufficient to create a special reserve by any book entry but that such reserve so created shall continue without being transferred simultaneously to any other account as is done in this case. In other words, according to him, it is not an empty formality to create a book entry for the purpose of creation of any special reserve to avail the benefit under Section 36(1)(viii). According to him, the assessee has created a reserve by transfer of Rs. 71,18,186 by debiting the P&L a/c and immediately after the, creation of the reserve the entire amount has been transferred to ‘provision for bad and doubtful debts account’ leaving no balance in that account. He therefore, contends that the intention of the legislature was defeated by transfer of the amount to another account to satisfy another condition imposed by the Industrial Development Bank of India. The fact is that the Finance Bill, 1997 made the requirement of maintenance of the reserve clearer and the law is same even earlier also without such amendment.
8. We have considered the rival submissions made on behalf of the assessee and also that of the Revenue. Section 36(1)(viii) as it stood at the relevant point of time 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 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 Chapter VI-A carried to such reserve account :
Provided that the corporation or, as the case may be, the company is for the time being approved by the Central Government for the purpose of this clause :
Provided further that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid-up share capital excluding the amounts capitalised from reserves of the corporation or, as the case may be, the company, ho allowance under this clause shall be made in respect of such excess;
Explanation.–In this clause,–
(a) ‘financial corporation’ shall include a public company and a Government company;
(b) ‘public company’ shall have the meaning assigned to it in Section 3 of the Companies Act, 1956 (1 of 1956);
(c) ‘Government company’ shall have the meaning assigned to it in Section 617 of the Companies Act, 1956 (1 of 1956);”
9. The amendment was made by Finance Act, 1997, w.e.f. 1st April, 1998, by inserting the word ‘and maintained’ after the word ‘created’. The provision after the amendment to the extent they are relevant is quoted hereunder :
“(viii) in respect of any special reserve created and maintained by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility 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 profits derived from such business of providing long-term finance computed under the head ‘Profits and gains of business or profession’ before making any deduction under this clause carried to such reserve account:”
10. By the same Finance Act, w.e.f. 1st April, 1998, Section 41 of the IT Act also was amended by insertion of a new provision namely Sub-section (4A) to that section which reads as follows :
“(4A) Where a deduction has been allowed in respect of any special reserve created and maintained under Clause (via) of Sub-section (1) of Section 36, any amount subsequently withdrawn from such special reserve shall be deemed to be the profits and gains of business or profession and accordingly be chargeable to income-tax as the income of the previous year in which such amount is withdrawn.
Explanation.–Where any amount is withdrawn from the special reserve in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.”
11. Thus, it can be seen that while the legislature had amended Section 36(1)(viii) and intended to confer the benefit under that section only if that special reserve created is maintained, the consequence of withdrawing the amount from the special reserve in the previous year is taken care of by Sub-section (4A) of Section 41. In other words, if any deduction has been allowed in respect of any special reserve under Section 36(1)(viii) of the IT Act and it is subsequently withdrawn, then it shall be deemed to have been profits and gains of the business and are chargeable to income-tax. Thus, the creation and maintenance of the reserve funds has been made a condition for availing the benefit under Section 36(1)(viii) and the consequence of withdrawing any such amount after deduction is made, is also made by fiction of law, deemed to be the profit and gains of business chargeable to tax as the income of the previous year in which amount is withdrawn.
12. Going by the plain language of the section as it stood at the relevant point of time, it can be seen that creation of a special reserve was sufficient to entitle the assessee to claim the benefit under Section 36(1)(viii) of the IT Act and that the word “and maintained” was inserted only w.e.f. 1st April, 1998 and it is not given any retrospective effect either expressly or impliedly. The circular issued by the Department as quoted above also clarifies the position that it was intended only to operate subsequent to assessment year in question, after the same was amended and not before. The Tribunal has relied on the decision of the Supreme Court in Indian Overseas Bank’s case (supra). In that case, the question arose for consideration was as to whether the reserves contemplated under Section 17 of the Banking Companies Act, 1949, and the one contemplated by proviso (b) to Section 10(2)(vib) of the IT Act, 1992, are two independent reserves. In that context, it was held that the entries in the account books required by proviso (b) to Section 10(2)(vib) was not an idle formality and a separate reserve fund has to be created for the purpose of Section 10(2)(vib). There, the banking company which was the assessee, claimed development debate under proviso (b) to Section 10(2)(vib) of the IT Act, 1922 and contended that the transfer which it has made to a reserve fund was sufficient to meet the requirements of Section 17 of the Banking Companies Act, 1949, as well as proviso (b) to Section 10 (2)(vib) of the IT Act. Admittedly, the creation of the fund was only under Section 17 of the Banking Companies Act. As to whether that amount was sufficient enough to meet the requirement under proviso (b) to Section 10(2)(vib) of the IT Act, it was held that it was not sufficient to meet the requirement of the law since in order to claim the benefit of the said proviso there should be a special reserve created for that purpose. In other words, where there is only one special reserve created, the assessee cannot claim the benefit, of proviso (b) to Section 10(2)(vib) without any such reserve created for that purpose. It was in that context that the Supreme Court held that the reserve contemplated by Section 17 of the Banking Companies Act and the one contemplated by proviso (b) to Section 10(2)(vib) of the Act are independent and separate reserves because the amount to be transferred to that reserve is debited before the P&L a/c is made up and that amount is required to be credited to a reserve account to be utilized by the assessee during a period of ten years for the purpose of business of the undertaking. The nature of the two reserves were held to be different and they were intended to serve two different purposes. It is also clear from the terms of the proviso that the transfer to the reserve fund was to make up the P&L a/c. It was in these circumstances, that it was held that the requirement of Section 10(2)(vib), read with the explanation thereto was not complied with by the assessee entitling him to claim the allowance in question. The position is different here. Here, there is no dispute that the reserve is created in the P&L a/c. The only question is whether the transfer of the amount subsequently to the “bad and doubtful debts” would disentitle the assessee to claim the benefit under Section 36(1)(viii) of the IT Act ? In other words, when a special reserve is created whether the transfer of the amount subsequently would disentitle the assessee to claim the benefit and whether the assessee was required to maintain that reserve for claiming the benefit.
13. In Shri Shubhlaxmi Mills Ltd. v. Addl. CIT (1989) 177 ITR 193 (SC) the apex Court had occasion to consider a question as to whether mere book entry is sufficient as having created the reserve under Sub-section (3) of Section 34 of the IT Act for claiming the development rate under Section 33(1) of the said Act. In that case, the assessee was a textile mill. For the asst. yr. 1962-63, the previous year being the calendar year 1961, it claimed certain amounts as allowances as development rebate under Section 33(1) of the IT Act. The ITO rejected the claim on the ground that the assessee had not created a reserve as contemplated under Section 34(3) of the IT Act, 1961. On second appeal, the claim of the assessee was found favour with. The matter was referred to the High Court for its opinion and the question was answered in favour of the Revenue by the High Court, against which the assessee filed the appeal before the apex Court. It was contended that the view taken by the High Court was erroneous and that it was not necessary that reserve should be created in the previous year during which the machinery or plant was installed. An Explanation was added by the Finance Act, 1966, by which it was declared that the deduction referred to under Section 33 could not be denied by reason only that the amount debited to the P&L a/c of the relevant previous year and credited to the aforesaid reserve account exceeded the amount of the profit of such previous year (as arrived at without making the deposit aforesaid) in accordance with the P&L a/c. The Explanation was inserted with retrospective effect from the commencement of the Act. Difference of opinion had existed between the High Courts on the question whether the statute required the creation of the reserve in the previous year in which the new machinery or plant was installed, when the amount of the profit of that previous year either nil or insufficient for the purposes of creating such reserve. The apex Court held that what is contemplated is only the creation of reserve fund in the relevant previous year irrespective of the result of the P&L a/c disclosed by the books of the assessee and mere book entries will suffice for creating such a reserve fund. The debit entries and the entries relating to the reserve fund have to be made before the P&L a/c is finally drawn up. The apex Court also took notice of the fact that in order to claim the development rebate under Section 33(1) it is obligatory that the debit entries in the P&L a/c and the credit entry in a reserve account should be made in the relevant previous year in which the machinery or plant is installed or first put to use and that the development rebate contemplated by Sub-section (1) of Section 33 cannot be allowed as a deduction unless a reserve account has been created in the previous year in which the installation or first use occurs. Any doubt in so reading the provisions because of want, or insufficiency of profit in such previous year has been removed by the Explanation to Clause (a) of Sub-section (3) of Section 34.
14. The above decision is authority for the proposition that mere book entries creating the reserve before drawing upon the P&L a/c is sufficient regarding the creation of development related reserve. In this case, therefore, when such a book entry has been made, undoubtedly the reserve has been created. But the further question as to whether the transfer of the amount from the reserve so created would disentitle the assessee to claim the benefit, alone arise for consideration. It can be seen from the scheme of the IT Act that whenever any condition is to be complied with either as on a particular day or for the whole of the year, as the case may be, the legislature has always taken care to specifically mention the requirements. For example, in Section 2(18) of the IT Act the words “company in which the public are substantially interested” is defined and Clause (B) specifically refers to the shares in the company held by a Government and as per Clause (B) if the Government is holding not less than 50 per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by the Government. …” [Emphasis, italicised in print, supplied only to show that the condition prescribed under Clause (B) under Section 18 is to be ‘throughout the relevant previous year.’].
Again, under Section 2(18) in Clause (A) it is stipulated that a company which is not a private company as defined in the Companies Act, 1956 and the shares in the company is not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits were as on the last day of the relevant previous year….’ Again, when we come to Section 32A(2) while defining an industrial undertaking under Expln. (2) what is required is that “an industrial undertaking shall be deemed to be a small scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year….” Again in Section 79, the word “last day of the previous year” is specifically mentioned. Thus it can be seen that whenever the legislature intended that something should be done on the last day or throughout the year, appropriate provisions are made to bring home the intended effect. Therefore, according to the learned counsel appearing for the appellant/assessee, when the legislature did not intend that the reserve fund so created should be maintained for the relevant assessment year in question, it cannot be imported to the section to disentitle the assessee to claim the benefit. In other words, when the creation of a reserve fund alone is a condition to be satisfied for claiming the benefit, a further condition that it should be maintained shall not be imposed as the legislative intention is clear that such maintenance of the reserve is insisted only for the subsequent financial year after the amendment brought out w.e.f. 1st April, 1998. The apex Court in Vazir Sultan Tobacco Co. Ltd. v. CIT (1981) 132 ITR 559 (SC) considered the question as to the difference between “provision” and “reserves” and the meanings assigned in Companies Act, 1956. It was held :
“The expression ‘reserve’ has not been defined in the Super Profits Tax Act, 1963, or the Companies (Profits) Surtax Act, 1964, The dictionaries do not make any distinction between the two concepts ‘reserve’ and ‘provision’ while giving their primary meanings, whereas in the context of those Acts a clear distinction between the two is implied though the expression ‘reserve’ is not defined since it occurs in taxing statutes applicable to companies only and to no other assessable entities, the expression has to be understood in its popular sense, that is to say, the sense or meaning that is attributed to it by men of business, trade and commerce and by persons interested in or dealing with companies, Therefore, the meanings attached to the words ‘reserves’ and ‘provisions’ in the Companies Act, 1956, dealing with the preparation of the balance sheet and the P&L a/c would govern their construction for the purposes of the two enactments, The broad distinction between the two is that whereas a ‘provision’ is a charge against the profits to be taken into account against gross receipts in the P&L a/c, a ‘reserve’ is an appropriation of profits, the asset or assets by which it is represented being retained to form part of the capital employed in the business.”
15. According to the learned counsel for the appellant, applying the aforesaid meaning, there cannot be any doubt that the reserve having been created, by the transfer of an amount to another account namely, towards provisions for “bad and doubtful debts accounts” its character does not cease to be as that of a reserve; on the other hand, it continues to be a reserve fund. Learned counsel for the Revenue however, placed reliance on the decision of the Supreme Court in CIT v. Travancore Titanium Products Ltd. (2001) 247 ITR 186 (SC). The expression “provision” and “reserve” were considered and it was held thus :
“… The broad distinction between the two is that whereas a provision is a charge against the profits to be taken into account against gross receipts in the P&L a/c, a reserve is an appropriation of profits, the asset or assets by which it is represented being retained to form part of the capital employed in the business. The true nature and character of an appropriation has to be determined with reference to the substance of the matter….”
16. In that case, amounts were held to be recorded as “provision” and since the amount was set apart to meet a loan liability and the amount was less than the liabilities it was held that it cannot be regarded as an asset and hence it was not includible in capital for purposes of surtax. In State Bank of Patiala v. CIT (1996) 219 ITR 706 (SC) the apex Court held that :
“The distinction between a provision and reserve is, in commercial accountancy fairly well-known. The provisions made against anticipated losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the P&L a/c and the balance sheet. On the other hand, reserves are appropriations of profits, the assets by which they are represented being retained to form part of the capital employed in the business. Provisions are usually shown in the balance sheet by way of deductions from the assets in respect of which they are made whereas general reserves and reserve funds are shown as part of the proprietor’s interest. An amount set aside out of profits and other surpluses, not designed to meet a liability, contingency, commitment or diminution in the value of assets known to exist at the date of the balance sheet is a reserve, but an amount set aside out of profits and other surpluses to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision.”
17. There, the bank, namely, the State Bank of Patiala set apart the amounts as “reserve” for “bad and doubtful debts” in all the years. A claim was laid that such sum was qualified for the purpose of Rule 1(xi)(b) of the First Schedule and Rule 1(iii) of the Second Schedule to the Act and such sum, representing reserves, should be included in the capital of the appellant for appropriate relief. The question arose as to whether the amount provided by the assessee for bad and doubtful debts in the balance sheet qualified as a reserve for the purpose of the relevant rule referred to above and qualified as a reserve for inclusion in the capital of the assessee. The High Court took the view that on the facts and circumstances of the case, sums of money set apart by the assessee as reserves are really “provisions” and not “reserves” and so, such sums are not entitled to the relief granted by the Tribunal. It concluded as follows :
“For the reasons recorded above, we are of the view that on the facts and
circumstances of the present case, the sums of money set apart by the
assessee herein for meeting its anticipated liability were a ‘provision’ and the
Tribunal erred in law in holding them to be a ‘reserve’. In the result, both the
questions referred to us are answered in the negative, i.e., against the assessee
and in favour of the Revenue.” [Emphasis, italicised in print, supplied]
But the apex Court did not agree with view. It observed thus :
“A fair reading of the above decisions would go to show that if the transfer of an amount is made ad hoc, when there is no known or anticipated liability, such fund will only be treated as ‘reserve’. In this case, substantial amounts were set apart as reserves. No amount of bad debt was actually written off or adjusted against the amount claimed as reserves. No claim for any deduction by way of bad debts were made during the relevant assessment years. The assessee never appropriated any amount against any bad and doubtful debts. The amounts throughout remained in the account of the assessee by way of capital and the assessee treated the said amounts as ‘reserves’ and not as ‘provisions’ designed to meet liability, contingency, commitment or diminution in the value of assets known to exist at the relevant dates of the balance sheets…. It cannot be said either, that the amounts set apart out of the profits were designed to meet any known liability, that existed at the date of the balance sheet, Tested in the light of the decisions of this Court, referred to hereinabove, it appears to us, that the amounts set apart towards bad and doubtful debts in these cases are ‘reserves’ qualifying for appropriate relief under Rule 1(xi)(b) of the First Schedule and Rule 1(iii) of the Second Schedule of the Act.”
18. Therefore, we find considerable force in the submission made by the learned counsel for the appellant that though the amounts were transferred to “bad and doubtful debts” there was not any existing liability or that there was any known liability. The question is not whether the assessee can anticipate or reasonably anticipate on the date when the balance sheet prepared about a “bad and doubtful debts” and therefore, the amounts continued to be as a “reserve” and not a “provision”.
19. As we have seen the condition for availing the benefit under Section 36(1)(viii) of the IT Act, as it stood at the relevant time, is that a reserve fund should be created and that there is 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, we have no hesitation to hold that such a requirement made explicitly clear both by amendment to Section 36(1)(viii) as well as by insertion of Sub-section (4A) of Section 41 of the IT Act, that any retrospective effect cannot be presumed to be a condition for granting the benefit as per the provisions which stood prior to the amendment in question.
In the above circumstances, we hold that the decision of the Tribunal holding that the assessee is not entitled for the benefit of Section 36(1)(viii) is erroneous in law. We set aside the order of the Tribunal as well as that of the CIT and confirm the decision of the ITO. The question raised before us is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.