CIT vs. LIC Housing Finance Ltd (Bombay High Court)

This court held in the matter of Grasim Industries Ltd. (supra) that the condition precedent to the exercise of jurisdiction under section 263 was that the order sought to be revised must be erroneous insofar as it was prejudicial to the interests of the revenue. Where two views are inherently possible and the assessment could not be subjected to the jurisdiction under section 263. A similar view has been taken by the another Division Bench of this Court in CIT vs. Gabriel India Ltd. (supra) this view has been consistently followed. On the issue pertaining to applicability of the amended provision of reserve funds created prior to the amendment the Delhi High Court in CIT vs. I.F.C.I.(supra) has followed the analysis of the Kerala High Court in the matter of Kerala Finance Corporation Vs. CIT (2003) 261 ITR 708 (Ker). While interpreting the provisions of the amendment, the Kerala High Court held that the amendment was prospective and would be applicable only for the assessment year 1998-99 and therefore cannot be applied for the assessment years prior thereto. The said judgment has held that deduction that has been allowed in respect of amounts transferred to the special reserve under section 36(1)(viii) of the Act prior to amendment and which amounts were subsequently withdrawn should not be subjected to tax. Going by the plain language as it stood at the relevant time, it can be seen that creation of a reserve was sufficient to entitle the assessee to claim the benefit under section 36(1)(viii) and the assessee was not obliged to maintain the said reserve. The inclusion of words “and maintain” was not retrospective. We do not find any reason to differ from this view expressed by the Kerala High Court and which was quoted with approval by Delhi High Court in CIT vs. I.F.C.I. (supra).