IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNESDAY, THE 20TH AUGUST 2008 / 29TH SRAVANA 1930 I.T.A.No.66 of 2008 ------------------------------------- (AGAINST THE ORDER DATED 15TH OCTOBER, 2003 IN I.T.A.NO.128/COCH/2001 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, KOCHI) (ASSESSMENT YEAR 1997-98) .................... APPELLANT/RESPONDENT:- ------------------------------------------ THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY SENIOR COUNSEL, GOVERNMENT OF INDIA (TAXES) SRI.P.K.RAVEENDRANATHA MENON (SENIOR ADVOCATE) & STANDING COUNSEL FOR GOVERNMENT OF INDIA (TAXES) SRI.GEORGE K. GEORGE. RESPONDENT/APPELLANT:- ------------------------------------------- M/S. KERALA FINANCIAL CORPORATION, VELLAYAMBALAM, THIRUVANANTHAPURAM. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 20/08/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- H.L.Dattu, C.J. & A.K.Bsheer, J. --------------------------------------------- I.T.A.No.66 of 2008 ---------------------------------------------- Dated, this the 20th day of August, 2008 JUDGMENT H.L.Dattu, C.J. The Revenue is before us in this appeal, being aggrieved by the orders passed by the Income Tax Appellate Tribunal, Cochin Bench, Kochi, in I.T.A.No.128/COCH/2001 dated 15th October, 2003, for the assessment year 1997-98. 2. The Revenue has raised the following questions of law for our consideration and decision. They are as under: “1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to the benefit of section 36(1)(viii) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the assessee who made the appropriation of Rs.5,60,79,781/- from the profit and loss account to the special reserve account and transferred the entire balance in the account to the provision for bad and doubtful debt account and thereby the balance as on 31-3-1996 in the Special Reserve Account was nil, is entitled to the benefit of section 36(1)(viii) of the I.T.Act? 3. Whether, on the facts and in the circumstances of the case is not the conduct of the assessee apart from being an idle formality against the intendment of the legislature in enacting the provision? I.T.Appeal No.66 of 2008 - 2 - 4. Whether, on the facts and in the circumstances of the case and on an interpretation of section 36(1)(viii) is not the order of the Tribunal on the issue wrong and against law”. 3. In our view, in view of the decision of a Division Bench of this Court in the case of Kerala Financial Corporation v. Commissioner of Income Tax [(2003) 261 I.T.R. 708], the issue raised by the Revenue is no more debatable. In the said decision, the Court has held as under: “...... that the condition for availing the benefit under section 36(1)(viii) of the Income-tax Act, as it stood at the relevant time, was that a reserve fund should be created and there was no dispute that such a fund was created. Hence, the assessee was entitled to deduction under section 36(1)(viii) for the assessment year 1994-95”. 4. In the above view of the matter, the questions of law raised by the Revenue require to be answered against the Revenue and in favour of the assessee. We do so. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/-