National Cooperative Development Cop., V. ACIT Circle-13 (1),

ITA 1595/DEL/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4296 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 29-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 28-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 80HHC; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G . BANSAL, ACCOUNTANT MEMBER I.T.A. NO.1595/DEL/2008 ASSESSMENT YEAR : 2003-04 NATIONAL COOPERATIVE DEVELOPMENT VS. ASSTT. C.I.T., CORPORATION, 4, SIRI INDL. AREA, CIRCLE-13(1), HAUZ KHAS, NEW DELHI NEW DELHI PAN NO.AAACN 1964 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.V.S.R. KRISHNA, CA RESPONDENT BY : SHRI ASHOK PANDEY, CIT-DR ORDER PER K.G. BANSAL, AM: IN THIS APPEAL, THE ASSESSEE HAS TAKEN UP THE FOLLOWING G ROUNDS:- 1. THE ORDER U/S 263 OF THE INCOME-TAX ACT, 1961 DATED 12. 03.2008 FOR THE ASSESSMENT YEAR 2003-04 IS WRONG /AND BAD IN L AW IN SO FAR AS THERE IS NO ERROR OR PREJUDICE IN THE ASSESSMENT OR DER U/S 143(3) DATED 25.10.2005 BY THE ASSESSING OFFICER TO WAR RANT ACTION U/S 263 OF THE INCOME-TAX ACT, 1961. THE SAI D ORDER U/S 263 IS WITHOUT JURISDICTION AND SHOULD BE CANCELLED. 2. THE APPELLANT FURTHER CONTENDS THAT THE CLAIM OF DEDUCTI ON U/S 36(1)(VIII) WAS ALLOWED TO THE ASSESSEE FROM ASSESSMENT YEAR 1994-95 UPTO ASSESSMENT YEAR 2002-03 ON THE ENTIRE BUSINES S PROFITS AND THE SAME SHOULD BE FOLLOWED FOR THE ASSESSMEN T YEAR 2003-04 BASED ON THE CONSISTENCY PRINCIPLE AS CLAIMED B Y THE ASSESSEE AND ALLOWED BY THE ASSESSING OFFICER. THE ALLEGATI ON THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE IS WITHOUT ANY EVIDENCE, OR M ATERIAL. 1595-2008-NCDC 2 THEREFORE, ALSO THE ORDER OF CIT U/S 263 DESERVES TO THE CANCELLED. 3. THE LEARNED CIT HAS ERRED IN LAW AND ON FACTS IN NOT APP RECIATING THAT THE INTEREST ON BANK DEPOSITS, MISC. RECEIPTS, DIVID END ON LONG TERM INVESTMENTS, INTEREST ON ADVANCES TO STAFFS AND SERV ICE CHARGES ON SUGAR DEVELOPMENT FUND LOANS ARE ALL INTEG RAL PART OF THE ASSESSEES BUSINESS OF PROVIDING LONG TERM FINANCE FO R THE GROWTH OF THE COOPERATIVE SECTOR. THE CLAIM OF THE ASSESS EE STANDS ALREADY EXAMINED BY THE ASSESSING OFFICER AND ALLO WED IN THE ASSESSMENT. THEREFORE, ACTION U/S 263 OF THE INCOME-T AX ACT, 1961 IS WITHOUT ANY MATERIAL, ILLEGAL ON SURMISES AND CONJECTURES AND TO BE CANCELLED. 4. THE APPELLANT CONTENDS THAT, EVEN ASSUMING FOR A MOVEMENT THAT THERE ARE TWO VIEWS THAT ARE POSSIBLE I.E., THE ONE PREFERRED BY THE ASSESSEE AND THE OTHER BY .THE DEPARTMENT, THE VIEW THAT IS I N FAVOUR OF THE ASSESSEE HAS TO BE FOLLOWED AND ALLOWED AND CANNOT BE A GROUND FOR INVOKING REVISIONARY JURISDICT ION U/S 263 OF THE INCOME-TAX ACT, 1961. 5. THE LEARNED CIT HAS ERRED IN LAW AND ON FACTS IN INTERPRET ING SECTION 36(1)(VIII) BY REFERRING TO CERTAIN JUDGMENTS W HICH ARE ALL RELATING TO INTERPRETATION OF DEDUCTION SECTION UNDER CHA PTER VIA AND IN THE CONTEXT OF THOSE SECTIONS AND NOT TO SECTION S ALLOWING BENEFIT LIKE 36(1)(VIII). THEREFORE ALSO, THERE IS NO ERROR OR PREJUDICE, IT IS THE VIEW OF THE CIT, WHICH CANNOT BE A FOUNDATION FOR ACTION U/S 263 OF THE INCOME-TAX ACT, 1961. 6. THE APPELLANT FURTHER CONTENDS THAT EVEN ON MERITS, THE CLA IM OF BENEFIT U/S 36(1)(VIII) IS ALLOWABLE ON INTEREST ON BANK DEPOSITS AS THE BANK DEPOSITS ARE FOR SHORT-TERM PERIODS DURING THE INTERREGNUM PERIOD OF REPAYMENT AND REDEPLOYMENT OF FUNDS F OR PROVIDING LONG-TERM LOANS AND NOT A SEPARATE ACTIVITY . THE SOURCE OF THE SHORT-TERM DEPOSITS IS LONG-TERM LOAN REPAYMENTS FUNDS/GRANTS BY THE CENTRAL GOVERNMENT AND TERM LOAN FRO M THE BANKS. SIMILARLY, DIVIDEND ON INVESTMENTS, OTHER INCOM ES, ALL OF WHICH HAVE DIRECT NEXUS TO THE BUSINESS OF LONG TERM FINA NCING. THEREFORE, THE CLAIM OF DEDUCTION U/S 36(1)(VIII) IS IN ORDER AND ALLOWABLE EVEN ON MERITS. THE ORDER U/S 263 ON THIS SCOR E ALSO DESERVES TO BE CANCELLED. 1595-2008-NCDC 3 7. THE ORDER U/S 263 IS WRONG AND BAD IN LAW AND HAS TO BE ANNULLED. 8. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 9. THE APPELLANT PRAYED THAT HE MAY BE ALLOWED TO ADD, AMEND, ALTER AND FOREGO ANY OF THE GROUNDS AT THE TIME OF HEARIN G. 2. BEFORE US, THE ONLY ARGUMENT TAKEN BY THE LEARNED COUNSEL HAS BEEN THAT THE ORDER PASSED BY THE ASSESSING OFFICER ON 25.10.2005, WHI CH HAS BEEN SUBJECT MATTER OF REVISION BY THE LEARNED CIT-V, NEW DELHI, WAS NO T ERRONEOUS ON THE DATE WHEN THE ORDER WAS MADE. 2.1 IN THIS CONNECTION, HE REFERRED TO THE HISTORY OF THE CASE IN BRIEF. IT IS SUBMITTED THAT IN ALL THE ASSESSMENTS OF THE ASSESSEE, PRI OR TO ASSESSMENT YEAR 2003-04, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 36( 1)(VIII) OF THE INCOME-TAX ACT, 1961 (THE ACT), WAS ACCEPTED ON THE FOOTING IT IS ENGAGED IN THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR THE ACTIVITIES PRESCRI BED IN THE PROVISION. THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER FOR TH IS YEAR ALSO IN AN ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT AFTER CONSI DERING VARIOUS FACTS RELEVANT FOR GRANTING THE DEDUCTION. IN THIS CONNECTION , OUR ATTENTION HAS BEEN DRAWN TOWARDS VARIOUS PAPERS PLACED IN THE PAPER BOOK, WHICH ARE AS UNDER:- I) OBJECT CLAUSE 9(2) REGARDING ADVANCING LOANS OR GRANT ING SUBSIDIES TO STATE GOVERNMENTS FOR FINANCING COOPERATIVE SOCIETIES INTER ALIA FOR PURCHASE OF AGRICULTURAL PRODUCE ETC., SUPPLY OF SEEDS ET C, AND PARTICIPATING IN SHARE CAPITAL OF NATIONAL LEVEL COOPER ATIVES SOCIETIES. IT IS SUBMITTED THAT THE ASSESSEE HAS BEEN GRANTING LONG-TERM FIN ANCE IN PURSUANCE OF THIS OBJECT. 1595-2008-NCDC 4 II) STATEMENT OF INCOME SHOWING NET INCOME OF `74,37,801/- A ND TRANSFER OF `29,75,120/- BEING 40% OF THE AFORESAID INCOME TO THE SP ECIAL RESERVE CREDITED IN PURSUANCE OF SECTION 36(1)(VIII); III) BREAK UP OF THE MISCELLANEOUS INCOME OF `2,01,38,611/- A ND INCOME OF `282,74,87,775/-, AND TERM LOANS RAISED FROM BANKS AM OUNTING TO `555,50,30,000/-; IV) THE PAST ASSESSMENTS OF THE ASSESSEE FOR ASSESSMENT YEARS 199 9-00 TO 2002-03 MADE EITHER U/S 143(1) OR 143(3), IN WHICH THE DEDUCTION WAS ALLOWED; V) THE DETAILS OF INTEREST RECEIVED ON SHORT-TERM DEPOSITS FR OM VARIOUS BANKS; VI) ASSESSMENT ORDER PASSED U/S 143(3) FOR THIS YEAR, IN WHI CH THE INCOME RETURNED BY THE ASSESSEE IS ACCEPTED; VII) LETTER ISSUED BY THE ASSESSING OFFICER REQUIRING DETAILS ON 15 POINTS IN RESPECT OF INCOME EARNED, MISCELLANEOUS RECEIPTS AND AMOUNTS RECEIVED AND PAID; AND VIII) NOTICE U/S 263 DATED 20.03.2006 SEEKING TO REVISE THE ORDER IN RESPECT OF DIVIDEND ON INVESTMENT, MISCELLANEOUS RECEIPTS AND INTER EST ON BANK ACCOUNT IN RESPECT OF SHORT-TERM DEPOSITS. 2.2 THE CASE OF THE LEARNED COUNSEL IS THAT THE ASSESSEE HA S BEEN CARRYING ON THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR THE ACTIVIT IES PRESCRIBED IN SECTION 36(1)(VIII) SINCE LONG. IT HAD BEEN CLAIMING THE DEDUCT ION, WHICH WAS ALLOWED IN ALL ASSESSMENTS INCLUDING THE ASSESSMENT FOR THIS YEAR. THE A SSESSMENT WAS MADE AFTER EXAMINING DETAILS IN THE MATTER. ALTHOUGH THE TRIBUNAL HAS DECIDED THE MATTER AGAINST THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 IN I.T.A. NO.4706/D/09 DATED 20.11.2009, NO ADVERSE DECISION WAS AVAILABLE TILL THE P ASSING OF THE ASSESSMENT ORDER. THEREFORE, AT THAT POINT OF TIME PASSING ASSESSMEN T ORDER, THE MATTER WAS 1595-2008-NCDC 5 SUSCEPTIBLE TO TWO VIEWS. THE ASSESSING OFFICER HEARD TH E MATTER AND TOOK A DECISION IN FAVOUR OF THE ASSESSEE. THEREFORE, THE ORDER WAS NOT ERRONEOUS. SINCE THE ORDER WAS NOT ERRONEOUS, IT WAS ALSO NOT PREJUDICIA L TO THE INTEREST OF THE REVENUE. ACCORDINGLY, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. IN REPLY, THE LEARNED DR REFERRED TO THE RELEVANT PROVISIO N, WHICH PROVIDES DEDUCTION AS UNDER:- (VIII) IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINT AINED BY A FINANCIAL CORPORATION WHICH IS ENGAGED IN PROVIDING L ONG-TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA OR BY A PUBLIC COMP ANY FORMED AND REGISTERED IN INDIA WITH THE MAIN OBJECT OF CARRYING ON THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR CONSTRUCTION OR PURC HASE 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 B USINESS OR PROFESSION BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUS E) CARRIED TO SUCH RESERVE ACCOUNT: 3.1 HIS CASE IS THAT THE PROVISION ALLOWS DEDUCTION OF AN AMOUNT NOT EXCEEDING 40% OF THE PROFITS DERIVED FROM SUCH BUSINESS OF PROVID ING LONG-TERM (EMPHASIS SUPPLIES). IT IS SUBMITTED THAT THE WORD DERIVED STA NDS CONTRADISTINGUISHED FROM THE WORDS ATTRIBUTABLE TO, AND THERE IS A LONG STAND ING JURISPRUDENCE REGARDING INTERPRETATION OF THESE WORDS. THE CONCLUSION OF DERIVED FROM CAN BE INFERRED ONLY IF THERE IS A PROXIMATE CONNECTION BETWEEN THE INCOME AND THE BUSINESS OF PROVIDING LONG-TERM FINANCE. THIS INTENTION HAS ALSO BEEN CLARIFIED IN CIRCULAR NO.717 DATED 14.08.1995, ISSUED IN RESPECT OF THIS AMEND MENT AND REPORTED IN (1995) 215 ITR (STATUTE) 70, AT PAGE 86 OF THE REPORT. PRIOR TO THIS AMENDMENT, THE ASSESSEE WAS ENTITLED TO THE DEDUCTION ON AN ALTOGETHER DIFF ERENT BASIS. THEREFORE, THE ASSESSEE WAS ALLOWED THE DEDUCTION AS CLAIMED. HOWEVER, THE LEARNED CIT 1595-2008-NCDC 6 NOTED FROM THE RECORD OF ASSESSMENT FOR THIS YEAR THAT T HE DEDUCTION WAS ALLOWED EXCESSIVELY AGAINST THE PLAIN LANGUAGE OF THE APPLICABLE P ROVISION. THEREFORE, THE REVISIONARY ORDER WAS PASSED. CONSEQUENTLY, ASSESSMENT OF EARLIER YEARS, TO WHICH THE AMENDED PROVISION APPLIED, WAS ALSO REOPENED. THE TRIB UNAL HAS ALREADY CONFIRMED THE STAND OF THE REVENUE IN THE CASE OF ASSESSEE IT SELF FOR ASSESSMENT YEAR 2007-08. IT IS ARGUED THAT SINCE THE CLAIM ALLOWED WA S EXCESSIVE ON PLAIN READING OF THE PROVISION, THE VIEW TAKEN BY THE ASSESSING OFFICER WAS NOT AT ALL A POSSIBLE VIEW. THEREFORE, THE ASSESSMENT ORDER WAS CLEARLY ERRONEOUS. IT ALSO LED TO SHORT CHARGING OF TAX, THEREBY MAKING IT PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, IT IS AGITATED THAT THE ORDER OF THE LEARNED CIT MAY BE SUSTAINED. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION S MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN DECLARING T OTAL INCOME OF `46,86,650/-. IN THIS RETURN, THE ASSESSEE CLAIMED THE DED UCTION OF `29,75,120/-, BEING 40% OF THE NET INCOME DERIVED FROM THE BUSINESS. THE ASSESSING OFFICER ASKED FOR VARIOUS DETAILS AND AS MENTIONED WHILE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL, SUCH DETAILS WERE FILED. HOWEVER, NO SPECIF IC QUERY WAS MADE IN RESPECT OF CORRECTNESS OF THE CLAIM OF DEDUCTION U/S 36(1 )(VIII). A SUMMARY ORDER CONSISTING OF ONLY ONE PAGE WAS PASSED, IN WHICH THE R ETURN WAS ACCEPTED WITHOUT ANY ADJUSTMENT. THE LEARNED CIT FOUND THAT THE CLAIM WA S NOT MADE OR ALLOWED AS PER THE STATUTORY PROVISION AND, THEREFORE, PASSED THE REVI SIONARY ORDER HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE IN RESPECT OF MATTERS DEALT WITH THEREIN. THE QUESTION IS WHETHER, THE LEARNED CIT WAS RIGHT IN DOING SO? 4.1 WE MAY DEAL WITH THE CASES RELIED UPON BY THE LEARNED CO UNSEL, WHICH WERE QUOTED BEFORE US IN THE COURSE OF HEARING. IN THE CASE OF MALABAR INDUSTRIAL 1595-2008-NCDC 7 COMPANY LIMITED VS. CIT (2000) 243 ITR 83, THE HONBL E SUPREME COURT HELD THAT FOR INVOKING JURISDICTION U/S 263, TWO CONDITIONS H AVE TO BE SATISFIED CUMULATIVELY:- I) THE ORDER IS ERRONEOUS; II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE CASE OF CIT VS. MAX INDIA LIMITED (2007) 295 IT R 282, THE HONBLE SUPREME COURT HELD THAT THE POSITION OF LAW HAS TO BE SEEN ON THE DATE ON WHICH REVISIONARY ORDER WAS PASSED. IN THE CASE OF CIT VS. AR VIND JEWELLERS (2003) 259 ITR 503, THE HONBLE GUJARAT HIGH COURT INTER ALIA HELD THAT WHEN THE ASSESSING OFFICER WAS OF A PARTICULAR VIEW, THE MERE FACT THAT A D IFFERENT VIEW CAN ALSO BE TAKEN, CANNOT BE GOOD GROUND FOR REVISING THE ASSESSMENT ORDER. IN THE CASE OF CIT VS. GABRIEL INDIA LIMITED (1993) 203 ITR 108 (BOM.), IT WAS HELD THAT WHEN THE ASSESSING OFFICER HAS CONSIDERED THE MATTER, THE CIT CAN N OT BRAND THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SIMPL Y BECAUSE NO ELABORATE DISCUSSION HAS BEEN MADE IN THE ASSESSMENT ORDER. IN THE C ASE OF CIT VS. DESIGN AND AUTOMATION ENGINEERS (BOMBAY) PVT. LTD. (2010) 32 3 ITR 632, THE HONBLE BOMBAY HIGH COURT HELD THAT IF THE VIEW TAKEN BY THE AS SESSING OFFICER IS A POSSIBLE VIEW, IT CANNOT BE SAID THAT THE ORDER IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE BECAUSE THERE COULD BE ANOTHER VIEW IN THE MATTER. THE LEARNED COUNSEL ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS. NIRMA CHEMICAL WORKS PVT. LTD. (2009) 309 ITR 67 (GUJARAT); CIT VS. GREENWORLD CORPO RATION (2009) 314 ITR 81 (SUPREME COURT); CIT VS. BHARAT ALUMINIUM COMPANY LTD. ; (2008) 303 ITR 256 (DELHI); AND CIT VS. DEEPAK MITTAL (2010) 324 ITR 411 (P&H). THESE CASES FURTHER LEAD TO THE INFERENCE THAT THE CIT CANNOT INTERFERE WITH THE INDEPENDENCE OF THE ASSESSING OFFICER. 4.2 THE REVENUE, ON THE OTHER HAND, RELIED ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF GRUH FINANCE LIMITED VS. ACIT (2009) 316 ITR (AT) 440 1595-2008-NCDC 8 DATED 16.05.2008, DEALING DIRECTLY WITH THE PROVISION UNDER CONSIDERATION. THE ORDER FOLLOWED THE DECISION IN THE CASE OF CIT VS. STERLIN G FOOD LIMITED (1999) 237 ITR 579 (SUPREME COURT), IN RESPECT OF THE WORD DERIVED U SED IN THE PROVISION. THE ORDER TOOK INTO ACCOUNT THE AMENDMENT MADE BY FINANCE ACT, 1995 AND CIRCULAR NO.717, EXPLAINING THE IMPORT OF THE AMENDMENT. IT WAS CONCLUDED THAT AFTER THE AMENDMENT, THE SCOPE OF THE DEDUCTION HAS BEEN NARR OWED DOWN. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED BELOW:- NOW, COMING TO THE PROVISIONS OF SECTION 36(1)(VIII) READ WITH THE NOTES AND THE MEMORANDUM FOR NOTES AND CLAUSES IN THE FI NANCE BILL, 1995, WE FIND THAT THE PURPOSE OF AMENDING SECTION 36(1) (VIII) WAS TO RESTRICT THE DEDUCTION AVAILABLE TO THE ASSESSEE IN RESPECT O F ANY SPECIAL RESERVES CREATED NOT EXCEEDING 40%, OF THE PROFITS DER IVED FROM THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR CO NSTRUCTION OR PURCHASE OF HOUSES IN INDIA. THEREFORE, THE IMMEDIATE SOUR CE OF INCOME WHICH IS ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII) MUST BE THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR CONSTRUCTI ON OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES. THERE IS NO DISPUTE THAT THE ASSESSEE HAS EARNED THE DISCOUNTING CHARGES FROM THE BUSIN ESS OF DISCOUNTING THE INVESTMENTS AND NOT FROM THE BUSINESS OF PROVIDING LONG-TERM FINANCE. SIMILARLY, THE INTEREST ON BANK DEPOSI TS AND ENTITY, THE IMMEDIATE SOURCE OF SUCH INCOME IS THE INTEREST EARNED ON THE DEPOSITS MADE BY THE ASSESSEE. THE IMMEDIATE SOURCE IS NOT PROVIDING LONG-TERM FINANCE FOR CONSTRUCTION OR PURCH ASE OF RESIDENTIAL HOUSES. THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF C IT VS. STERLING FOODS (1999) 237 ITR 579, THAT THE WORDS DERI VED FROM USED IN SECTION 80HHC WOULD MEET THE DIRECT NEXUS BETWEEN THE PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING. IT HAS BEEN POINTED OUT BY THE HONBLE SUPREME COURT THAT FOR AVAILING THE DEDUC TION, AN INDUSTRIAL UNDERTAKING SHOULD BE THE IMMEDIATE SOURCE OF THE PROFITS AND THAT MERE COMMERCIAL CONNECTION BETWEEN THE TWO WAS JU ST NOT SUFFICIENT. IN VIEW OF THE PRINCIPLE LAID DOWN BY THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS (1999) 237 ITR 579, THE IMMEDIATE SOURCE OF THIS INCOME ON WHICH THE ASSESSEE HAS CLAIMED DEDUCTION U/S 36(1)(VIII) MUST BE PROVIDING LONG-TERM FINANCE FOR CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDEN TIAL PURPOSES. 1595-2008-NCDC 9 IN VIEW OF THE AFORESAID DISCUSSION, THE GROUND TAKEN BY THE ASSESSEE STANDS DISMISSED. THEREFORE, APPEAL FILED BY THE ASSESSEE I S DISMISSED. I.T.A. NO.2867/AHD./2007: BY THE REVENUE. 5. HAVING CONSIDERED THE PROVISION CONTAINED IN THE SECTI ON, IT IS CLEAR THAT IT HAS TO BE INTERPRETED IN A NARROWER SENSE BECAUSE OF THE WORDS D ERIVED FROM SUCH BUSINESS OF PROVIDING LONG-TERM FINANCE. THE OTHER WOR DS, NAMELY, COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON DO NOT EXPAND THE AMBIT OF DEDUCTION TO THE WHOLE OF BUSINESS PROFIT AS THESE WOR DS ONLY MEAN THAT INCOME FROM PROVIDING LONG-TERM FINANCE SHOULD BE RIGHTLY AS SESSABLE AND ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, WE DO NOT AGREE WITH THE LEARNED COUNSEL THAT THE PROVISION HAS TO BE READ IN THE WIDEST POSSIBLE TERMS BECAUSE OF THE AFORESAID WORDS. A PLAIN READING OF THE SECTION SHOWS THAT THE ASSESSMENT ORDER WAS ERRONEOUS INASMUCH AS IT FAILED TO T AKE INTO CONSIDERATION THE AMENDMENT BROUGHT BY FINANCE ACT, 1995. THE CASES CITED BY THE LEARNED COUNSEL DO NOT CONTAIN ANY CASE UNDER WHICH IT HAS BEEN HELD THA T IF THE ORDER WAS ERRONEOUS, IT CANNOT BE MADE SUBJECT MATTER OF REVISION B Y THE CIT BECAUSE OF THE REASON THAT THE ASSESSING OFFICER HAD CONSIDERED THE FACTS OF THE CASE AND FOLLOWED HIS OWN ORDERS IN EARLIER YEARS. THE ASSESSMENT OF A PAR TICULAR YEAR HAS TO BE MADE AS PER LAW APPLICABLE TO THAT YEAR. IF THE JURISPRUDENC E UNDERGOES CHANGE, THE ORDER HAS TO BE SEEN AS PER LAW PREVAILING AT THE TIME OF P ASSING THE REVISIONARY ORDER. NO DOUBT, THE ORDER OF THE TRIBUNAL IN THE CASE OF GRUH FINANCE LIMITED (SUPRA) WAS NOT THERE BEFORE THE LEARNED CIT, HOWEVER, THAT IS NOT MATERIAL BECAUSE THE ORDER WAS ERRONEOUS EVEN ON PLAIN READING OF THE PROVI SION. SINCE IT LED TO LEVY OF LESSER TAX THEN THE TAX LEVIABLE ON PLAIN READING OF T HE PROVISION, IT WAS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS HELD ACC ORDINGLY. 6. IN RESULT, THE APPEAL IS DISMISSED. 1595-2008-NCDC 10 ORDER WAS PRONOUNCED IN OPEN COURT ON 13.04.2011. SD/- SD/- ( I.P. BANSAL ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTA NT MEMBER NS DT. 13.04.2011. COPY FORWARDED TO:- 1. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION, 4, SIRI I NSTITUTIONAL AREA, HAUZ KHAS, NEW DELHI-18. 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 13(1), NEW D ELHI. 3. THE RESPONDENT 4. THE CIT 5. THE CIT (A)-, NEW DELHI. 6. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).