IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 20-01-2026 CORAM THE HON'BLE DR.JUSTICE ANITA SUMANTH AND THE HON'BLE MR.JUSTICE MUMMINENI SUDHEER KUMAR TCA No.169 of 2013 M/s IDFC Limited KRM Towers, 8^th Floor, No.1, Harringon Road, Chetpet, Chennai – 600 031.

..Appellant Vs The Assistant Commissioner Of Income Tax, Company Circle II(3), Chennai.

..Respondent Prayer: Appeal filed under Section 260A of the Income Tax Act, 1961 against Income Tax Appeal No.101/Mds/2012 dated 28.09.2012 on the file of the Income Tax Appellate Tribunal, Chennai “C” Bench for the assessment year

2007 – 2008.

For Appellant(s): Mr.Niraj Sheth For Respondent(s): Mr.T.Ravikumar Senior Standing Counsel

JUDGMENT

(Judgment of the Court was delivered by Dr.Anita Sumanth J.)

This Tax Case (Appeal) relating to assessment year 2007-08 has been filed at the instance of the assessee assailing order dated 28.09.2012 passed by the Income Tax Appellate Tribunal (in short ‘ITAT”/’Tribunal’).

2. The substantial questions of law that had been admitted on 19.06.2013 are as follows:

1. Whether the Income Tax Appellate Tribunal erred in holding that the deduction to which the appellant was entitled under Section 36(1)(viia)(c) of the Act was to be granted after reducing, from the appellant's income, the deduction to which the appellant was entitled under Section 36(1)(viii) of the Act?

2. Whether the Income Tax Appellate Tribunal ought to have held that the deduction to which the appellant was entitled under Section 36(viia)(c) of the Act was to be granted to it without reducing, from the appellant's income, the deduction to which the appellant was entitled under Section 36(1)(viii)

of the Act?

3. We have heard the detailed submissions of Mr.Niraj Sheth, learned counsel appearing for Mr.O.R.Santhanakrishnan, learned counsel on record for the appellant/assessee and Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the respondent/revenue.

4. We find that the issue stands squarely covered by decisions of two different Division Benches of this Court in the assessee’s own case for assessment years 2000-01, 2001-02 and 2002-03 in T.C.(A) Nos.1288 and 1290 of 2009 dated 08.09.2015 and T.C.(A)No.939 of 2008 dated 01.03.2019 respectively.

5. Hence, it would suffice for us to extract the discussion and reasoning in order dated 08.09.2015, which is the first order on this issue, as we concur with the same. The operative portion as aforesaid, reads thus: 26. In short, the question that falls for consideration is as to whether the deduction should first be allowed in terms of Section 36(1)(viii) for the application of the deduction under Section 36(1)

(viia)(c).

27. All the three authorities were of the unanimous view that there is a distinction between the two types of deduction. The deduction allowable under Section 36(1)(viii), after its amendment under the Finance Act, 1995, is on the profits derived from business. The deduction allowable under Section 36(1)(viia)(c) is on the total income. Therefore the authorities held that the deduction under clause (viii) will have to be computed first before applying the deduction under clause (viia)(c).

28. But keeping aside the amendment introduced in 1995 for a moment, if we have a look at the import of Section 36(1) by itself, it is clear that sub-section (1) of Section 36 lists out the matters in respect of which deductions can be allowed while computing the income referred to in Section 28. Clauses (i) to (xi) of sub-section (1) of Section 36 did not make any of those matters dependent upon one another. If an assessee is entitled to the benefit under one clause of sub-section (1) of Section 36, the assessee was not deprived of the benefit of the other clause. This is how several clauses in sub-section (1) have been arranged.

29. It is true that before the amendment introduced under the Finance Act, 1995, the deduction to be allowed under clause (viia)(c) and clause (vii) were placed on par. The deduction was only on the total income. B