LIC HOUSING FINANCE LTD, MUMBAI V. DCIT 2(2), MUMBAI

ITA 672/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2637 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYA SHANKAR
• Assessee Lawyers: SUNIL BHANDARI
• Keywords: Retrospective amendment; Advance ruling; Condonation of delay; Set aside
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR. VICE PRESIDENT AND SH RI R.K. PANDA, AM I.T.A. NOS.672 & 673/MUM/2009 (ASSESSMENT YEAR :2003-04 & 2004-05 ) LIC HOUSING FINANCE LTD., BOMBAY LIFE BUILDING, 2 ND FLOOR, 45/47, VEER NARIMAN ROAD, MUMBAI-400 001. PAN:AAACL1799C VS. THE DEPUTY COMMISSIONER OF INCOME TAX -2(2), AAYAKAR BHAVAN, R.NO.545, M.K.ROAD, MUMBAI-400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. SUNIL BHANDARI RESPONDENT BY : MR. DAYA SHANKAR, DR O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THESE TWO APPEALS FILED BY THE ASSESSEE PERTAIN TO THE ASSESSMENT YEARS 2003-04 & 2004-05 AND THEY ARE DI RECTED AGAINST THE ORDERS PASSED BY THE CIT UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 ON 26 TH MARCH, 2008. 2. THE APPEALS ARISE IN THE FOLLOWING CIRCUMSTANCES . THE ASSESSEE IS A COMPANY ENGAGED IN PROVIDING HOUSING FINANCE . IN THE RETURNS FILED FOR THE YEARS UNDER APPEAL, IT EXCLUDED RS.10 CRORES AND RS.25 CRORES RESPECTIVELY FROM THE PROF ITS AND GAINS OF BUSINESS IN THE COMPUTATION OF THE TOTAL INCOME FOR INCOME TAX PURPOSES. THESE AMOUNTS WERE EXCLUDED WITH THE NARRATION TRANSFER FROM SPECIAL RESERVE AND WITHDRAWAL FRO M SPECIAL RESERVE NOT TAXABLE RESPECTIVELY IN THE COMPUTAT ION SHEETS RELATING TO THE ASSESSMENT YEARS 2003-04 AND 2004-0 5. IN NOTE NO.19 OF THE NOTES TO THE ACCOUNTS AT SCHEDULE 14 O F THE ANNUAL REPORT FOR THE YEAR ENDED 31.3.2003, IT WAS NOTED AS FOLLOWS:- SPECIAL RESERVE HAS BEEN CREATED OVER THE YEARS IN TERMS OF SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 ITA NOS.672 & 273/MUM/09 2 OUT OF THE PROFITS OF THE COMPANY. SPECIAL RESERVE NO. I RELATES TO THE AMOUNTS TRANSFERRED UPTO FINANCIAL YEAR 1996-97. WHEREAS SPECIAL RESERVE NO. II RELATE S TO THE AMOUNTS TRANSFERRED THEREAFTER. IN THE CURRE NT FINANCIAL YEAR RS.10,00,00,000/- (PREVIOUS YEAR RS.20,00,00,000/-) HAS BEEN TRANSFERRED FROM SPECIAL RESERVE NO. I TO THE PROFIT AND LOSS ACCOUN T. 3. WHILE COMPLETING THE ASSESSMENTS UNDER SECTION 1 43(3) OF THE ACT, THE ASSESSING OFFICER ACCEPTED THE AFORESA ID EXCLUSION OF THE AMOUNTS FROM THE PROFITS AND GAINS OF THE BU SINESS. HOWEVER, THERE IS NO SPECIFIC DISCUSSION OR REFEREN CE TO THE ASSESSEES CLAIM AS ABOVE. THE ASSESSING OFFICER MA DE CERTAIN OTHER DISALLOWANCES IN THE ASSESSMENT WITH WHICH WE ARE NOT CONCERNED AND IN RESPECT OF THOSE DISALLOWANCES THE RE IS SOMEWHAT A LENGTHY DISCUSSION IN THE ASSESSMENT ORD ERS. 4. SUBSEQUENTLY, THE CIT TOOK PROCEEDINGS UNDER SEC TION 263 ON THE GROUND THAT THE ASSESSMENTS MADE AS ABOV E ACCEPTING THE ASSESSEES CLAIM REGARDING THE EXCLUS ION OF THE AMOUNTS TRANSFERRED FROM THE SPECIAL RESERVE NO. I TO THE PROFIT AND LOSS ACCOUNT WERE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY ISSUED NOTICES TO TH E ASSESSEE AS TO WHY THE ASSESSMENTS CANNOT BE REVISED AND THE ASSESSING OFFICER BE DIRECTED TO INCLUDE THE AMOUNTS IN THE I NCOME OF THE ASSESSEE. THE ASSESSEE WOULD APPEAR TO HAVE RAISED OBJECTIONS TO THE NOTICE. THE OBJECTIONS ARE SET OUT IN THE OR DER OF THE CIT AND THE GIST THEREOF IS THAT THE RESERVES CREATED B Y THE ASSESSEE PRIOR TO 1.4.1997 WERE GOVERNED BY SECTION 36(1)(VI II) AS IT STOOD THEN WHICH WAS DIFFERENTLY WORDED AND THEREFORE THE AMENDED SECTION DOES NOT APPLY. THE ASSESSEE ALSO RELIED O N THE JUDGEMENT OF THE KERALA HIGH COURT IN THE CASE OF K ERALA FINANCE CORPORATION VS. CIT., 261 ITR 708 TO CONTEN D THAT THE AMENDMENT MADE TO THE ABOVE SECTION BY THE FINANCE ACT, 1997 TOOK EFFECT PROSPECTIVELY FROM 1.4.1998 AND DID NOT HAVE ANY ITA NOS.672 & 273/MUM/09 3 RETROSPECTIVE EFFECT. SIMILAR ARGUMENTS WERE ADVAN CED ALSO WITH REGARD TO THE PROVISIONS OF SECTION 41(4A) WHICH WA S ALSO INTRODUCED BY THE FINANCE ACT, 1997 SIMULTANEOUSLY WITH THE AMENDMENT TO SECTION 36(1)(VIII). THE CIT HOWEVER, FOUND NO MERIT IN THE OBJECTIONS OF THE ASSESSEE. ACCORDING TO HIM, THE AMENDMENT MADE TO SECTION 36(1)(VIII) AND THE INTRO DUCTION OF SECTION 41(4A) WERE TO DO AWAY WITH A MISCHIEF OR L ACUNA IN THE PROVISIONS AND THEREFORE, ANY AMOUNTS WITHDRAWN FRO M THE SPECIAL RESERVE, IRRESPECTIVE OF WHETHER IT WAS MER ELY CREATED OR WAS CREATED AND MAINTAINED, WERE TAXABLE AS PR OFITS OF THE BUSINESS IN THE YEAR IN WHICH THEY WERE WITHDRAWN. IN THIS VIEW OF THE MATTER, HE HELD THAT THE AMOUNTS WITHDRAWN F ROM THE SPECIAL RESERVES DURING THE RELEVANT PREVIOUS YEARS , EVEN THOUGH THEY WERE CREATED PRIOR TO 1.4.1997, WERE TAXABLE I N THE ASSESSMENT YEARS UNDER CONSIDERATION. HE ACCORDING LY DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE TOTAL INCOME INCLUDING THE SUM OF RS.10,00,00,000/- AND RS.25,00,00,000/- RESPECTIVELY FOR THE ASSESSMENT YEARS 2003-04 AND 2 004-05. 5. IT IS AGAINST THE AFORESAID ORDERS OF THE CIT T HAT THE ASSESSEE HAS FILED THE PRESENT APPEALS. THE APPEALS ARE DELAYED. THE CIT PASSED THE ORDERS FOR BOTH THE YEARS ON 26. 3.2008 AND IT IS NOT KNOWN AS TO WHEN THEY WERE SERVED ON THE ASSESSEE. THEREFORE, THE OFFICE HAS COMPUTED THE DELAY FROM T HE DATE OF THE ORDERS OF THE CIT AND HAS MARKED THAT THE APPEALS A RE DELAYED BY 253 DAYS. THE GENERAL MANAGER (TAXATION) AND COM PANY SECRETARY OF THE ASSESSEE HAS FILED AN AFFIDAVIT EX PLAINING THE DELAY IN WHICH HE HAS STATED THAT DUE TO HEAVY BURD EN OF WORK IN A DUAL CAPACITY NAMELY AS GENERAL MANAGER(TAXATI ON) AS WELL AS COMPANY SECRETARY, THE RECEIPT OF THE ORDERS OF THE CIT WAS NOT ATTENDED TO IN TIME AND IT WAS ONLY WHEN THE AS SESSING OFFICER HAD PURPORTED TO GIVE EFFECT TO THE AFORESA ID ORDERS THAT HE REALIZED THAT THE ORDERS OF THE CIT UNDER SECTIO N 263 WOULD ITA NOS.672 & 273/MUM/09 4 HAVE BEEN SERVED ON THE ASSESSEE AND IT WAS ONLY TH EREAFTER THAT HE CONTACTED THE TAX CONSULTANT WHO ADVISED THE ASS ESSEE TO FILE APPEALS TO THE TRIBUNAL IMMEDIATELY. IT IS PLEADED THAT IN THESE CIRCUMSTANCES, THE DELAY SHOULD BE CONDONED. ON BEH ALF OF THE DEPARTMENT IT IS POINTED OUT THAT NO SUFFICIENT CAU SE HAS BEEN SHOWN TO EXIST AND IT WAS ONLY A GENERAL PLEA THAT DUE TO HEAVY WORK LOAD THE ASSESSEE COULD NOT FILE THE APPEALS I N TIME WHICH SHOULD NOT BE ACCEPTED. 6. ON A CAREFUL CONSIDERATION OF THE AFFIDAVIT AND THE EXPLANATION OF THE ASSESSEE, WE ARE OF THE VIEW THA T THE DELAY SHOULD BE CONDONED. THE PERSON WHO WAS IN-CHARGE OF THE TAXATION MATTERS OF THE ASSESSEE ALSO ACTED AS ITS COMPANY SECRETARY AND NATURALLY HIS WORKLOAD WAS HEAVY. HE WAS ALSO REQUIRED TO CONVENE AND ATTEND THE BOARD MEETINGS I N HIS CAPACITY AS COMPANY SECRETARY. IT SEEMS REASONABLE THAT DUE TO HIS WORK LOAD AND PRESSURE HE OVERLOOKED THE RECEIP T OF THE ORDERS OF THE CIT UNDER SECTION 263 AND FAILED TO T AKE ANY PROCEEDINGS AGAINST THEM. WHEN HE WAS MADE AWARE OF THE EXISTENCE OF THESE ORDERS, WHEN HE PARTICIPATED IN THE PROCEEDINGS BEFORE THE ASSESSING OFFICER TO GIVE EF FECT TO THE ORDERS OF THE CIT, HE IMMEDIATELY CONTACTED THE TAX CONSULTANTS OF THE ASSESSEE AND PROCEEDED TO FILE THE APPEALS. WE ARE SATISFIED THAT IN THESE CIRCUMSTANCES THE DELAY WAS DUE TO SUFFICIENT CAUSE AND WAS NOT WILLFUL OR DELIBERATE. IN RAMNATH SAO @ RAMNATH SAHU VS. GOBARDHAN SAO, AIR 2002 (SC) 1201, THE SUPREME COURT HAS HELD THAT PRAGMATIC VIEW SHOU LD BE TAKEN IN SUCH CASES AND CONDONATION OF DELAY SHOULD BE THE NORMAL RULE AND REFUSAL THE EXCEPTION . THERE ARE S IMILAR OBSERVATIONS BY THE SUPREME COURT IN THE CASE OF N.BALAKRISHNAN VS. M. KRISHNAMURTHY 1998 (7) SCC 12 3. RESPECTFULLY FOLLOWING THESE JUDGEMENTS, WE CONDONE THE DELAY AND ADMIT BOTH THE APPEALS. ITA NOS.672 & 273/MUM/09 5 7. SECTION 36(1)(VIII) PROVIDES FOR DEDUCTION OF A N AMOUNT NOT EXCEEDING 40% OF THE PROFITS DERIVED FROM THE B USINESS OF PROVIDING LONG TERM FINANCE, IF THE ASSESSEE CREATE S A SPECIAL RESERVE. BEFORE 1.4.1998, THE SECTION PROVIDED THAT IN RESPECT OF ANY SPECIAL RESERVE CREATED BY A FINANCIAL CORPOR ATION ENGAGED IN PROVIDING LONG TERM FINANCE FOR CERTAIN SPECIFIC PURPOSES, SUCH DEDUCTION WOULD BE GIVEN. BY THE FINANCE ACT, 1997, WHICH TOOK EFFECT FROM 1.4.1998 THE LANGUAGE OF TH E PROVISION WAS AMENDED TO STATE THAT THE DEDUCTION WOULD BE AV AILABLE IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAI NED BY THE FINANCIAL CORPORATION . SIMULTANEOUSLY, SUB-SECTION (4A) WAS INSERTED IN SECTION 41 WHICH PROVIDED THAT WHERE A DEDUCTION HAS BEEN ALLOWED IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAINED UNDER CLAUSE VIII 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 BUSI NESS AND ACCORDINGLY CHARGED TO INCOME TAX AS THE INCOME OF THE YEAR IN WHICH SUCH AMOUNT IS WITHDRAWN. THE CONTENTION PUT FORWARD BEFORE US ON BEHALF OF THE ASSESSEE WAS THAT THERE ARE TWO CATEGORIES OF RESERVES TO BE CREATED BY AN ASSESSEE ENGAGED IN PROVIDING LONG TERM FINANCE (A) SPECIAL RESERVE C REATED AND (B) SPECIAL RESERVE CREATED AND MAINTAINED, AND THAT SE CTION 41(4A) WOULD APPLY ONLY IN RESPECT OF THE LATTER CATEGORY OF RESERVES, I.E. TO SAY, SPECIAL RESERVES CREATED AND MAINTAINED BY THE ASSESSEE AND WOULD NOT APPLY TO ANY SPECIAL RESERVE CREATED WITHOUT ANY OBLIGATION TO MAINTAIN THE SAME. IT IS CONTENDED TH AT IN ANY CASE IT IS A QUESTION OF INTERPRETATION OF THE STATUTORY PROVISIONS AND THE EFFECT OF THE AMENDMENTS MADE BY THE FINANCE AC T, 1997 ON THE SPECIAL RESERVES CREATED PRIOR TO 1-4-1998 AND SINCE MORE THAN ONE VIEW IS POSSIBLE ON THE EFFECT OF THE AMEN DMENTS, THE ADOPTION OF ONE OF THE PLAUSIBLE VIEWS BY THE AO WH ILE COMPLETING THE ASSESSMENTS DOES NOT CONFER JURISDIC TION ON THE CIT U/S.263 TO HOLD THAT THE ASSESSMENTS SO MADE AR E ITA NOS.672 & 273/MUM/09 6 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THESE CONTENTIONS ARE OPPOSED ON BEHALF OF THE DEPARTMENT AND IT IS CONTENDED THAT THE AMENDMENTS WERE MADE TO SUPPRESS THE MISCHIEF WHICH WAS PREVALENT WHEREBY ASSESSEES WERE WRITING BACK THE RESERVES TO THEIR PROFIT AND LOSS ACCOUNT AFTER HAVING AVAILED OF THE DEDUCTION AND WERE NOT PAYING TAX WH EN THE RESERVES WERE WRITTEN BACK. IT IS CONTENDED THAT TH E AMENDMENT TO SECTION 36(1)(VIII) MAKES NO DISTINCTION BETWEEN A SPECIAL RESERVE CREATED BEFORE 1.4.1998 AND THAT CREATED AN D MAINTAINED AS SUCH AFTER THE SAID DATE AND IF AFTER 1.4.1998 ANY SPECIAL RESERVE, WHETHER CREATED BEFORE OR AFTER TH E SAID DATE, IS WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT THE SAM E WOULD BE TAXED AS INCOME OF THAT YEAR UNDER SECTION 41(4A). IT IS ALSO CONTENDED BY THE DEPARTMENT THAT THE AMENDMENT LEAV ES NO DOUBT IN THE MATTER AND NO TWO INTERPRETATIONS ARE POSSIBLE AND THEREFORE, IT CANNOT BE SAID THAT THE CIT DID NOT H AVE JURISDICTION TO TAKE ACTION UNDER SECTION 263. 8. ON A CAREFUL CONSIDERATION OF THE MATTER, WE ARE OF THE VIEW THAT THE ASSESSEE MUST SUCCEED ON THE QUESTION OF JURISDICTION OF THE CIT TO TAKE ACTION UNDER SECTIO N 263 ON THE GROUND THAT THE ASSESSMENTS WERE ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF THE REVENUE. IN MALABAR INDUSTRIAL CO. LTD. VS. CIT., 243 ITR 83, THE SUPREME COURT HELD THAT WHEN THE ASSESSING OFFICER HAS TAKEN ONE VIEW ON A QUESTION ON WHICH TWO OR MORE VIEWS ARE POSSIBLE AND THE CIT DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER AND WANTS T O SUBSTITUTE HIS VIEW, THE ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLES S THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IF WE APPLY THIS CASE TO THE CASE BEFORE US, IT WILL BE S EEN THAT ON THE QUESTION OF THE INTERPRETATION OF SECTION 36(1)(VII I) OF THE ACT AS AMENDED BY THE FINANCE ACT, 1997 WITH EFFECT FROM 1 .4.1998, ITA NOS.672 & 273/MUM/09 7 THERE IS CERTAINLY SCOPE FOR MORE THAN ONE VIEW AND THE VIEW TAKEN BY THE AO CANNOT BE SAID TO BE UNSUSTAINABLE IN LAW. THE ASSESSEES VIEW IS THAT THE SPECIAL RESERVES CREATE D PRIOR TO THE AFORESAID DATE CANNOT BE ASSESSED UNDER SECTION 41( 4A) WHEN THEY ARE WRITTEN BACK TO THE PROFIT AND LOSS ACCOUN T BECAUSE WHEN THEY WERE CREATED THERE WAS NO STATUTORY CONDI TION THAT THEY SHOULD ALSO BE MAINTAINED AS A RESERVE. THUS, THERE WAS NO OBLIGATION ON THE ASSESSEE TO MAINTAIN THOSE RESERV ES. IF THAT IS SO, THE AMENDMENT DOES NOT AFFECT THOSE RESERVES AN D WHEN THEY ARE WRITTEN BACK TO THE PROFIT AND LOSS ACCOUN T AFTER 1.4.1998 THEY CANNOT BE ASSESSED TO TAX. THE VIEW O F THE ASSESSEE FURTHER IS THAT THE CONDITION THAT THE RES ERVE SHOULD BE MAINTAINED AS SUCH ATTACHES ONLY TO THE SPECIAL RES ERVES CREATED ON OR AFTER 1.4.1998 AND IF THAT CONDITION IS SUBSE QUENTLY VIOLATED BY WRITING IT BACK TO THE PROFIT AND LOSS ACCOUNT, ONLY THEN SECTION 41(4A) WOULD APPLY. IN OTHER WORDS, TH E CONTENTION OF THE ASSESSEE IS THAT WHEN THERE IS NO CONDITION FOR MAINTAINING THE SPECIAL RESERVE AS SUCH, THERE IS N O QUESTION OF ANY VIOLATION OF THE CONDITION. ON THE OTHER HAND, THE CONTENTION OF THE REVENUE IS THAT IRRESPECTIVE OF THE TIME IN WHICH THE SPECIAL RESERVE WAS CREATED AND IRRESPECT IVE OF THE FACT THAT WHEN IT WAS CREATED THERE WAS NO CONDITIO N THAT IT SHOULD ALSO BE MAINTAINED AS SUCH, THE AMENDMENT AP PLIES WHENEVER THE SPECIAL RESERVE IS WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT SINCE THE OBJECT OF THE AMENDMENT IS T O PUT AN END TO THE MISCHIEF ADOPTED BY SOME ASSESSEES WHO WROTE BACK THE SPECIAL RESERVE TO THE PROFIT AND LOSS ACCOUNT WITH OUT OFFERING THE SAME AS INCOME EVEN THOUGH WHEN THE SPECIAL RES ERVE WAS CREATED THEY HAD OBTAINED A DEDUCTION. THE ASSESSE ES CONTENTION SEEMS TO BE SUPPORTED BY CIRCULAR NO.763 DATED 18.02.1998 ISSUED BY CBDT EXPLAINING THE AMENDMENTS MADE BY THE FINANCE ACT, 1997. IN PARA 21.1 OF THE CIRCU LAR IT HAS BEEN STATED THAT CLAUSE 36(1)(VIII) AS IT STOOD BEF ORE THE ITA NOS.672 & 273/MUM/09 8 AMENDMENT IMPOSES A CONDITION OF CREATION OF A SPE CIAL RESERVE, IT DOES NOT IMPOSE ANY CONDITION ON THE MA INTENANCE OF THE RESERVE. IN PARA 21.2, THE OBJECT OF THE AMEND MENT HAS BEEN BROUGHT OUT BY SAYING THAT THE WORDS SPECIAL RESERVE CREATED IN THE SECTION WAS AMENDED BY SUBSTITUTING IN THEIR PLACE THE WORDS SPECIAL RESERVE CREATED AND MAINT AINED IN ORDER TO INCORPORATE THE CONDITION REGARDING MAINT ENANCE OF THE RESERVE. THE CIRCULAR ALSO SAYS THAT THE AMENDMEN T WILL APPLY FROM THE ASSESSMENT YEAR 1998-99 AND SUBSEQUENT YEA RS. ANOTHER QUESTION THAT IS THROWN UP BY THE AMENDMENT IS WHETHER THE VIEW TAKEN BY THE CIT WOULD AMOUNT TO G IVING RETROSPECTIVE EFFECT TO A TAXING PROVISION NAMELY S ECTION 41(4A). IN ADDITION TO THE CIRCULAR THE JUDGEMENT OF THE K ERALA HIGH COURT CITED SUPRA ALSO SUPPORTS THE ASSESSEES POIN T OF VIEW. IN THIS JUDGEMENT, IT WAS HELD THAT THE CONDITION PRE SCRIBED BY SECTION 36(1)(VIII) AS IT STOOD BEFORE BEING AMENDE D WAS ONLY THAT A SPECIAL RESERVE SHOULD BE CREATED AND THAT THER E WAS NO CONDITION THAT IT SHOULD BE CONTINUED TO BE MAINTAI NED . THE REQUIREMENT THAT IT SHOULD BE MAINTAINED AS SUCH WA S BROUGHT IN ONLY BY THE AMENDMENT TO THE SECTION AND BY INSE RTION OF SUB-SECTION (4A) OF SECTION 41 WHICH DO NOT HAVE AN Y RETROSPECTIVE EFFECT. THE ORDER OF THE AUTHORITY FO R ADVANCE RULING IN THE CASE OF RURAL ELECTRIFICATION CORPORA TION LTD. (312 ITR 122) ALSO SUPPORTS THE ASSESSEES INTERPRETATIO N. IN THIS ORDER IT WAS HELD THAT BUT FOR THE AMENDMENT TO SEC TION 36(1)(VIII), THE RESTRICTION AGAINST WITHDRAWAL OF THE SPECIAL RESERVE CANNOT BE READ INTO THE SECTION. IT WAS FUR THER HELD THAT IT IS NOT PERMISSIBLE TO READ WORDS INTO A PRO VISION WHICH IS OTHERWISE CLEAR, MERELY BECAUSE THE OBJECT OF THE A MENDMENT WILL BE SERVED BETTER. IT WAS OBSERVED THAT THE ADD ITIONAL WORDS INTRODUCED INTO SECTION 36(1)(VIII) BY THE AMENDMEN T IMPOSED AN ADDITIONAL OBLIGATION WHICH IS NOT MERELY DECLARATO RY OF THE EXISTING PROVISION. WHILE MAKING THESE OBSERVATIONS , THE ITA NOS.672 & 273/MUM/09 9 AUTHORITY REFERRED TO THE CIRCULAR AND THE JUDGEMEN T OF THE KERALA HIGH COURT CITED ABOVE AS ALSO AN ORDER OF T HE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF DE LHI FINANCIAL CORPORATION VS. JCIT, (2007) 13 SOT 170. IN ADDITION TO THESE CASES, WE MAY ALSO REFER TO THE G ENERAL PRINCIPLE THAT IN THE ABSENCE OF CLEAR WORDS INDIC ATING THAT THE AMENDMENT IS CLARIFICATORY, IT SHOULD NOT BE GIVEN RETROSPECTIVE EFFECT, PARTICULARLY WHEN THE PRE-AMENDED PROVISION IS CLEAR AND UNAMBIGUOUS. IT IS ALSO TO BE NOTED THAT WHERE A NE W PROVISION IMPAIRS AN EXISTING RIGHT IN THIS CASE, THE RIGHT OF THE ASSESSEE TO UTILIZE THE RESERVE FREELY FOR OTHER PURPOSES - OR CREATES A NEW OBLIGATION IN THIS CASE, AN OBLIGATION TO MAINTAI N THE RESERVE AS SUCH - RETROSPECTIVITY CANNOT BE READILY INFERRED. IT WAS ALSO HELD IN GOVIND DAS VS. ITO (1976) 103 ITR 123 THAT IF THE ENACTMENT IS EXPRESSED IN LANGUAGE WHICH IS FAIRLY CAPABLE OF EITHER INTERPRETATION, IT OUGHT TO BE CONSTRUED PRO SPECTIVELY ONLY. 9. IN VIEW OF THE FOREGOING DISCUSSION, IT SEEMS TO US THAT IN THE PRESENT CASE, THE ACTION OF THE CIT IS BASED ON HIS INTERPRETATION OF THE AMENDED PROVISIONS OF SECTION 36(1)(VIII) AND SECTION 41(4A), INTRODUCED BY THE FINANCE ACT, 1997 WITH EFFECT FROM 1.4.1998, WHEREAS THE ASSESSING OFFICER HAS ACCEPTED THE INTERPRETATION CANVASSED BY THE ASSESS EE. THE CASE THUS FALLS SQUARELY WITHIN THE RATIO OF MALABAR IND USTRIAL COMPANY LTD. (SUPRA), WHERE IT WAS HELD THAT THE CI T CANNOT HOLD THE ASSESSMENT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE MERELY ON THE GROUND THAT H IS INTERPRETATION OF THE STATUTORY PROVISIONS SHOULD B E PREFERRED TO THE INTERPRETATION WHICH APPEALED TO THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE CIT HAD N O JURISDICTION TO TAKE PROCEEDINGS UNDER SECTION 263. ITA NOS.672 & 273/MUM/09 10 10. IN THE VIEW WE HAVE TAKEN, IT IS NOT NECESSARY TO EXAMINE AND DECIDE THE MERITS OF THE RIVAL INTERPRETATIONS. THE ORDERS OF THE CIT ARE ACCORDINGLY SET ASIDE AND THE APPEALS O F THE ASSESSEE ARE ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON THIS 2 ND DAY OF DECEMBER, 2009. SD/- (R.K. PANDA) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 2 ND DECEMBER, 2009. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-, MUMBAI. 4. THE CIT-2, MUMBAI 5. THE DR A BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI