1998 INSC 0155
                                                   CIT Trivandrum

                                                           Vs

                           Kerala State Industrial Development Corpn.Trivandrum

                                           (B. N. Kirpal, A. P. Misra JJ)

                                                      12.02.1998

                                                     JUDGMENT

KIRPAL J

1.In these appeals by certificate granted by the Kerala High Court, the following question of law has
been referred in respect of the assessment year 1978-79:-

                  "Whether, the Tribunal was right in law in holding that the statutory deduction under
                  Section 36(1)(viii) of the I.T. Act, 1961 should be calculated on the total income
                  before deduction of the amount allowable under the section?"

2.The Kerala High Court came to the conclusion that in computing the total income for the purpose
of Section 36(1)(viii) of the Income Tax Act, 1961, the total income has to be computed in
accordance with the provisions of Sections 30 to 43A expect Section 36(1)(viii).In arriving at this
decision, the High Court relied upon the observations of this Court in Cambay Electric Supply
Industrial Co. Ltd. Vs. Commissioner of Income Tax, (1978) 113 ITR 84.

3.The view which was taken by the Kerala High Court was in consonance with the view taken by
the Patna High Court in three decisions, Madhya Pradesh High Court in two decisions and Kerala
High Court itself in an earlier decision. It is stated that subsequent to the decision under appeal,
other High Courts have also taken the same view. The only dissenting view which has been
expressed is by the Karnataka High Court in Karnataka State Financial Corporation Vs.
Commissioner of Income Tax, (1988) 174 ITR 206.

4.Having gone through the decisions cited at the Bar, we find that the decision of the High Court
following its earlier decision in Commissioner of Income Tax Vs.Kerala State Industrial
Development Corporation Ltd.(No.2), (1990) 182 ITR 67, is unexceptionable. The Karnataka High
Court has tried to work out the sub-section on the basis of a mathematical formula and has dissented
from the decision of the Patna High Court in Commissioner of Income Tax, Bihar Vs. Bihar State
Financial Corporation, (1983) 142 ITR 518.It may here be mentioned that Civil Appeal No.3695 of
1982 against the aforesaid judgment reported in 142 ITR 518 was dismissed by this Court on 20th
January, 1995 thereby affirming the view of the Patna High Court. It may here be noticed that not
only the preponderance of the judicial opinion of the various High Courts is in line with the view
expressed by the Kerala High Court but the relevant sub-clause (viii) of Section 36(i) has
subsequently been amended so as to bring it in line with the view of the Patna and Kerala High
Courts. The decision of the Karnataka High Court does not appear to be correct being contrary to
the aforesaid decision of the Patna High Court which stands affirmed by its affirmation by this
Court on 20th January, 1995.The view of the other High Courts is in consonance with relevant
provisions of the Act. We, therefore, agree with the decision of the High Court in answering the
question of law in the affirmative and in favour of the assessee.

5.The appeals are dismissed. No order as to costs.