These appeals are by assessee. As common issue are involved, they are disposed of in consolidated order for sake of convenience. 2. first point in dispute is as regards quantum of deduction under section 36(1) (viii) of Income-tax Act, 1961 ('the Act'). assessee, Andhra Pradesh State Financial Corpn., is approved by central Government, for purposes of section 36(1) (viii). During relevant previous years, it had created special reserve in its accounts and claimed deduction under section 36(1) (viii) at 40 per cent, viz., 40/100 of its total income. IAC, however, allowed claim of assessee at 40/140 of total income. assessee was unsuccessful before Commissioner (Appeals). 3. Before us, it was urged by Shri Y. Ratnakar, learned counsel for assessee, that assessee is entitled to deduction of 40 per cent of its total income as it had created necessary special reserve as envisaged in section 36(1) (viii). total income in this context should be construed not as total income as understood in section 2(45) of Act. He submitted that authorities below did not consider in proper perspective decision of Tribunal for earlier years in assessee's own case and also decision of Patna High Court in CIT v. Bihar State Financial Corpn. [1983] 142 ITR 518. It was his plea that what is envisaged in section 36(1) (viii) is related to reserve and, therefore, once reserve is created, deduction at 40 per cent of total income should be allowed. In this context, he took us through definition of 'income' and 'total income' as contained in 1961 Act and emphasized that section 2 dealing with definitions is prefaced by clause to effect that all definitions should be understood in manner defined unless context otherwise requires. He pleaded that here is context in which total income should be construed not as total income after deduction under section 36(1) (viii) for purpose of computing admissible deduction of 40 per cent. He further submitted that there were more than one instructions of this Board as regards this deduction. earliest one was to effect that this 40 per cent referred to in section is to be computed after deducting such 40 per cent. In other words, it was 40/140. By letter, F. No. 204/35/73-IT (A-II), dated 12-11-1973, Board explained that this 40 per cent is to be worked out before making any deduction under section 36(1) (viii), that is 40/100. Later on, matter was reviewed in 1979 and Board reverted to its original view communicated in circular dated 25-11-1969. Tribunal had taken consistent view that deduction should be computed without making such deduction from total income. In this view of matter, Tribunal drew support from decision of Patna High Court in case of Bihar State Financial Corpn. (supra) and had allowed appeals of assessee in earlier years. He further explained that in Patna High Court case supra, High Court did not consider at all circular issued by Board and it was decision rendered on merits of case on basis of language employed in section. He concluded saying that subsequent amendments made to section further liberalised grant of deductions to approved financial corporations and he drew our attention in particular to latest amendment to section 36(1) (viii) by Finance Act, 1985, where in it has been clarified that deduction is to be made without making any deduction under said clause. Therefore, he pleaded that restrictive interpretation of 'total income' as suggested by revenue should not be restored to and assessee was entitled to deduction at 40 per cent straightway. 4. Shri Ratnakar Murthy for department vehemently argued that in construing statute granting reliefs or exemptions, there is no room for liberal construction, especially when language of section is clear, plain and unambiguous. He was of view that Tribunal based its decision in earlier assessment year in case of same assessee on later F. No. 204/35/73-IT (A-II) dated 12-11-1973. However, contents of this letter were superseded by Board in its circular dated 13-8-1979. Therefore, assessee cannot take shelter under decision of Tribunal rendered in it case for assessment years. As regards decision of Patna High Court in case of Bihar State Finance Corpn. (supra) it was his submission that that decision was rendered prior to amendments made in section and there was no discussion about Board's Circular F. No. 36/19/65-IT (Audit), dated 25-11-1969 in which it was specifically laid down that deduction should be allowed only after allowing deduction under section 36(1) (viii). Therefore, he submitted that decision of Patna High Court's case supra would be of no avail to assessee. 5. In addition to above, Shri Ratnakar Murthy has given submissions in writing which are as follows: "1. At outset, it is submitted that there is no longer any case of vested right in favour of assessee, as Board's instruction dated 12-11-1973 has been withdrawn by Board in their instruction dated 13-8-1979 (copy enclosed) and earlier instruction dated 25-11-1969 has been restored. 2. Thus only decision of Patna High Court dated 19-7-1974 in CIT v. Bihar State Finance Corpn. [1983] 142 ITR 518 which is said to support stand of Board in their instruction dated 12-11-1973, according to Tribunal, survives for consideration. It is submitted that decision of Patna High Court seems to resolve ambiguity in wording of section 36(1) (viii), as Hon'ble Court saw it, as on 1-4-1965 relevant for assessment year in question in that case, viz., 1965-66. It may not be quoted as authority and applied to case on hand where we are concerned with law as on 1-4- 1982 and 1-4-1983 which governs assessments for 1982-83 and 1983-84, respectively, for following reasons: "(a) Section 36(1) (viii), which correspondent to section 10(2) (xiva) of Indian Income-tax Act, 1922 underwent subsequently many amendments - please see Finance Act, 1966, Finance (No. 2) Act 1967, Finance Act, 1970, Finance (No. 2) Act 1971, Finance Act, 1974, Finance Act, 1977, Finance Act, 1979, Finance Act, 1981 and lastly Finance Act, 1985 by which crucial words 'this clause and' were inserted with effect from 1-4-1985. (b) In fiscal statute it is not uncommon to measure or limit deduction as percentage of or with reference to total income as base and to maintain ratio between two. Similar reference to total income or total income as adjusted in particular specified way for purposes of Act in different contexts, may be noticed from sections 23(2) , 32A (3) , 33(2), 33A (2). Even under Wealth-tax Act, liability for tax of year is deducted as debt owed for computing net wealth, by calculating same in particular way. (c) technical word 'total income' is oldest in conception and definitely older that recent concept of gross total income found in Chapter VI-A. It has been well understood by all concerned and common sense meaning should not be substituted. (d) word was retained by Legislature all along and it survived many amendments for rationalisation or simplification. This means that Legislature intended to hold on to technical meaning and there is no ambiguity, at least now, whatsoever. (e) If we go through evolution of section, we notice that deduction has been increased progressively and benefit extended to new categories. benefit has been increased this time with effect from 1-4-1985 in different way. Instead of increasing rate of percentage applicable, base itself has been enlarged by putting it as not only before deductions under Chapter VI-A but also as before giving deduction under this section. This is something like increasing exemption limit in case of income-tax levy, instead of reducing rates. (f) It may be noticed that deduction under section (which should not be equated with case of exemption of incomes) is not of expense but of allocation/appropriation of income and statute has precisely specified measure with reference to total income. If certain higher deduction is allowed in subsequent year in deference to representations of assesses, it should not be interpreted as clarificatory of earlier position of law and benefit passed on for earlier year also." In view of above reasonings, he defended orders of authorities below. 6. Shri Ratnakar for assessee, in his counter arguments explained that even though there was in extence circular of Board, F. No. 36/19/65 IT (Audit), dated 25-11-1969, which was adverse to assessee, Patna High Court decided issue in favour of assessee in case of Bihar State Finance Corpn. (supra). Courts are not bound by circulars of Board even though IAC is bound by them. Patna High Court case was decided on merits of case in keeping with language of section 36(1) (viii) as it then stood. That decision, in spite of several amendments to said section is still applicable as essence of decision is that deduction envisaged in section 36(1) (viii) is available to assessee before making any such deduction form total income. latest amendment introducing phrase 'under this clause' by Finance Act was only clarificatory in nature. He further submitted that plea of learned departmental representative that decisions of Tribunal were rendered under aegis of Board's circular then prevailing (which has been subsequently withdrawn), is not correct, because Tribunal had also referred to Patna High Court decision in Bihar State Finance Corpn.'s case (supra) in its order for assessment years 1977- 78, 1978-79 and 1980-81. He has also cited number of case laws in support of submissions made by him and details are found in page 1 of paper book. 7. We have considered rival submissions and materials on record. Board's instruction dated 12-11-1973 was withdrawn in its instruction dated 13-8- 1979 which is as follows: "XXV/I/50 - Special Reserve Account under section 36(1) (viii) of Income-tax Act, 1961 in case of financial corporations - Clarification regarding Under section 36(1) (viii) of Income-tax Act, 1961, financial corporations engaged in providing long-term finance for industrial or agricultural development in India are entitled to deduction, in computation of their taxable profits, of amounts transferred by them out of such profits to special reserve account, up to specified percentage of their total income as computed before making any deduction under Chapter VI-A of Act. This deduction is available only where financial corporation is approved by Central Government for purposes of this section. question may arise whether specified percentage of rate is to be applied to total income (computed before making any deduction under Chapter VI-A) before or after making any deduction under section 36(1) (viii) of Income-tax Act, 1961. 2. This question was examined by Board on earlier occasion and t h e decision arrived at was communicated in Board's Circular letter F. No. 36/19/65 IT (Audit) dated 25-11-1969. view taken at that time was that deduction to be allowed under section 36(1) (viii) is to be calculated by applying t h e specified percentage to total income arrived at after allowing deduction under section 36(1) (viii). Subsequently, however, Board issued clarification to Department of Banking vide its U. O. No. 204/35/73-IT (A-II), dated 12-11-1973 wherein it was clarified that percentage would be applied to total income computed before making any deduction under Chapter VI-A as well as any deduction under section 36(1) (Viii) of Income-tax Act, 1961. Thus, above clarification had effect of negating earlier instructions of Board dated 25-11-1969. 3. matter has been re-examined by Board and it has been decided that earlier view communicated vide letter dated 25-11-1969 is correct. It means that specified percentage will be applied to total income (before making any deduction under Chapter VI-A) as reduced by deduction allowable under section 36(1) (viii). 4. Board desires that pending assessments be completed in accordance with aforesaid instructions. Remedial action wherever feasible should also be taken to withdraw higher deduction allowed as result of clarification issued by Board to Department of Banking, vide letter dated 12-11-1973. [F. No. 204/72/75-IT (A-II) dated 13-8-1979, from Central Board of Direct Taxes]." There is no circular as on date which is favorable to assessee, but there is old circular which is not favorable to assessee and which has b e e n revived by Board's circular of 1979. It is submission of departmental representative that as there is no circular of Board in favour of assessee there is no longer any case of vested right in favour of assessee. However, it was made clear in course of argument by assessee's counsel that he was not basing his claim on instructions of Board and he was not bound by instructions of Board. While circulars of Board might be binding on assessing authority, same is not case with assessee or with courts of law. 8. second contention of department is that decisions of Patna High Court in Bihar State Financial Corpn.'s case (supra) was rendered in accordance with law as it stood on 1-4-1965 when words in parenthesis, viz., 'computed before making any deduction under Chapter VIA' were not found, and same should not be made applicable to law as prevailing for assessment years in dispute before us. We have carefully gone through decision of Patna High Court (supra). decision was rendered on 7-8- 1974 following decision in case of same assessee rendered on 19-7- 1974 in Tax Case No. 96 of 1971. In former case, percentage of deduction was 25 per cent and in latter case, percentage of deduction was 10 per cent. In both cases, words in parenthesis, viz., 'computed before making any deduction under Chapter VI-A' inserted by Finance (No. 2) Act, 1967, with effect from 1-4-1968 were not engrafted in sub-clause under said section. In this context, Patna High Court held as follows: "... After this amendment, it is clear that expression 'total income' occurring in clause (viii) cannot mean total assessed income. For purpose of determining maximum limit of allowable deduction in clause (viii), figure of total income computed before making any deduction under Chapter VI-A has got to be taken. In such situation, will it be reasonable to say that total income must be total assessed income plus amount of deduction allowable under Chapter VI-A of Act? It would thus be seen that if interpretation which is sought to be put by Department on expression 'total income' is accepted, then amended provisions would be wholly otiose and inept; but it would not be so, rather it would be consistent and in consonance with earlier Act, if interpretation sought to be put on behalf of corporation is accepted to be correct." (p. 524) words in parenthesis as introduced by Finance (No. 2) Act, 1967, are found in section 36(1) (viii) for relevant assessment years before us and departmental representative has not made out any case as to why this decision of Patna High Court is not applicable to facts of case for relevant assessment years, viz., 1982-83 and 1983-84. 9. Shri Radhakrishna Murthy has referred to amendments made to sub-clause of this section since 1966. These amendments are in nature of enhancing or liberalising amount of deduction available to approved financial corporations. latest amendment introduced by Finance Act, 1985, has made it clear that deduction should be computed before making any such deduction under section. According to Shri Radhakrishna Murthy, it is only with effect from 1-4-1985 that manner in which assessee has computed its deduction would be followed and not before. According to learned counsel for assessee, this particular amendment is only clarificatory in nature. Having regard to process of liberalisation attempted by Legislature from time to time by enhancing and having regard to law as declared by Patna High Court in Bihar State Financial Corpn.'s case (supra) we are of view that this particular amendment introduced by Finance Act, 1985 is only clarificatory in nature. 10. third line of attack by Shri Radhakrishna Murthy is that whenever Legislature wanted it had employed specific language such as to be found in section 23(2) , 32A (3) , 33(2) and 33A (2) of Act, and, therefore, this amendment introduced by Finance Act, 1985, viz., 'before making any deduction under this clause', was valid only prospectively and not retrospectively. Section 32A deals with investment allowance, section 33 with development rebate and section 33A with development allowance. As Legislature was envisaging contingency of total income being nil or less than full amount of investment allowance, development rebate or development allowance, it had to necessarily explain concept of 'total income' in such context as total income without making any deduction for such allowances or rebate or any deduction under Charted VI-A. For example in section 32A (3), phrase 'without making any deduction under sub-section (1) of this section' was absolutely essential in that context. 11. This leaves us to consider meaning of 'total income' as found in section 23(2). Section 23(2) deals with computation of income from house property. stipulation was that said income from house property should not exceed 10 per cent of total income. Till 1967, total income on which 10 per cent was to be computed included value of property also, that is, 10/11 of total income. proviso to said section was amended in 1967 to effect that total income should be computed without including therein any income from such property and before making any deduction under Chapter VI-A. After this amendment in 1967, value of self-occupied property was limited to 10 per cent of assessee's other income without deduction under Chapter VI-A and section 280-O Act. reason for amendment is given in portion of following Board's circular: "In computing income attributable to house property owned and occupied by assessee for his own residence, annual value of such house property is determined under section 23(2) of Income-tax Act, in sum equal to full amount of its annual value (i.e., its annual letting value) as reduced by 50 per cent thereof, or Rs. 1,800, whichever is less. Under proviso to section 23(2) , as it stood before its amendment by Finance (No. 2) Act, reduced annual value so arrived at was further limited to 10 per cent of total income of assessee, and any excess over that limit was ignored. prescription of above-mentioned limit of 10 per cent of total income of assessee gave rise to certain complications in calculating assessable annual value of house property. This is because total income itself comprises net assessable income from such house property, which is to be arrived at after allowing various deduction from reduced annual value, e.g., allowance for repairs at one-sixth of annual value, and other expenses, such as ground rent, and interest payable on mortgage, if any, of property. In view of this position, annual value of such house property was, in practices, computed by applying formula derived from algebraic equation. In recent years, application of this formula had give rise to certain complications because of introduction of provisions in Income-tax Act for allowance of certain deductions, amount of which varies with magnitude of total income, e.g., deduction in respect of annuity deposit, which is calculated at prescribed rates on adjusted total income of assessee, and deduction of specified percentage of eligible amount of saving qualifying for tax relief. In order to resolve this difficulty, proviso to section 23(2) of Income-tax Act has been amended to provide that annual value of house property owned and occupied by assessee for his own residence will be limited to 10 per cent of his other income (i.e., income other than that from self-owned and self- occupied house property) as computed before making any deduction under Chapter VI-A of Income-tax Act or for annuity deposit. deductions admissible under Chapter VI-A of Income-tax Act comprise, inter alia, deduction of specified percentage of amount of savings through life insurance, Government or recognised provident funds, ect., qualifying for tax relief, deduction for expenditure incurred by resident individual or Hindu undivided family on medical care of handicapped dependents, etc." Thus, it will be evident that Legislature notice difficulty experienced in computing total income strictly in accordance with definition of 'total income' as contained in section 2(45) and, therefore, removed difficulty by explaining 'total income' as not including income from house property. question whether this particular amendment to section 23 is clarificatory or not is another point, with which we are not concerned. However, similar difficulties as detailed above would be encountered if 'total income' is construed as income before allowing deductions under Chapter VI-A, but after making deduction under section 36(1) (viii). Section 2 dealing with definitions is prefaced by words 'unless context otherwise requires'. Section 36(1) (viii) speaks of reserve and grant of deduction for reserve so created. reserve is only appropriation of profit. Therefore, to accept strict or restricted interpretation as suggested by departmental representative, is to go against accepted concept of 'reserve'. If amount of total income is taken as total income before making such deduction and deduction under Chapter VI-A, it will be in harmony with creation of reserve as envisaged by said section. In our view, amendment made by Finance Act, 1985, is only clarificatory in nature. 12. In yet another submission, learned departmental representative argues that deduction should not be equated with case of exemption of income for liberal construction and, therefore, it should not be held that amendment of 1985 was clarificatory in nature. 1961 Act deals with amendment of 1985 was clarificatory in nature. 1961 Act deals with exemptions and exclusions only in section 10 of Act. Other sections including those matters found under Chapter VI-A, like insurance premia, contribution to provident fund etc., are all described as 'deductions' In our view, even thought section 36(1) (viii) is put under caption 'other deductions' in computing profits or gains, it is in effect not deduction in sense of expenditure or loss but rather deduction in sense of incentive, Undoubtedly, approved financial institutions' sphere of activity would be greatly expended if their reserves were strengthened. Section 36(1) (viii) is designed to encourage creation of reserves by offering incentive in guise of deductions from total income. In our considered view, to argue that such deductions should be made from total income after making similar deduction from total income - that is 40/140 instead of 40/100 -would be in total neglect of purpose of section 36(1) (viii) n d , therefore, we reject contentions of learned department representative. Not only Courts are empowered to put liberal construction to work out purpose of section, but also as per qualifying words of section 2 , words in parenthesis occurring in section 36(1) (viii) have to be construed in conttext in which they are found. Therefore, we have no hesit ion in rejecting submissions made by learned departmental representative. We set aside order of Commissioner (Appeals) on this point. 13. next ground, which deals with claim for depreciation at revised rates, is not pressed. ground is accordingly dismissed. 14. last ground is in regard to interest under section 215 of Act. This is not maintainable in view of decision of Andhra Pradesh High Court in M. G. Bros. v. CIT [1985] 154 695. This ground is also dismissed. 15. In result, appeals are partly allowed. *** ANDHRA PRADESH STATE FINANCIAL CORPORATION v. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX