Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment years 1978-79 and 1983-84, the following common question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the deduction under Section 36(1)(viii) of the Income-tax Act, 1961, should be allowed on a given percentage of the total income as reduced by the said deduction allowable under Section 36(1)(viii) of the Act ?"
(2.) Shortly stated, the facts are that the assessee, Messrs. West Bengal Industrial Development Corporation Ltd., is admittedly a financial corporation within the meaning of Clause (viii) of Sub-section (1) of Section 36 of the Income-tax Act, 1961. The dispute in the assessment years 1978-79 and 1983-84 related to the manner of computation of the deduction allowable to the assessee under Clause (viii) of Sub-section (1) of Section 36 of the Act. The Income-tax Officer computed the deduction at the stipulated percentage of the total income arrived at after allowing the said deduction, that is to say, he reduced the total income by such allowable deduction and computed the deduction on the balance. The assessee went in appeal before the Commissioner of Income-tax (Appeals) who, following the judgment of the Patna High Court in the case of CIT v. Bihar State Financial Corporation [1983] 142 ITR 518, held that, for the purpose of deduction under Section 36(1)(viii), the total income of the assessee should be taken without reducing it by the amount of the said deduction. The Revenue came in appeal before the Tribunal. The Tribunal endorsed the order of the Commissioner of Income-tax (Appeals).
(3.) Before us, learned counsel appearing for the parties reiterated the contentions raised before the Tribunal.;