JUDGMENT judgment of court was delivered by A. K. Menon J.-The above appeals raise following common questions of law: "(a) Whether, on facts and in circumstances of case and in law, Tribunal was right in quashing order of Commissioner of Income-tax passed under section 263 of Income-tax Act, 1961? (b) Whether, on facts and in circumstances of case and in law, Tribunal was correct in holding that two views are possible with regard to applicability of section 36(1)(viii) read with section 41(4A) even though provisions of section 36(1)(viii), as amended with effect from April 1, 1997, do not provide any room for interpretation other than one adopted by Commissioner of Incometax in his order passed under section 263 of Income-tax Act?" These appeals are filed by Revenue pertaining to assessment years 2003-04 and 2004-05, respectively. common issue that arises pertains to provisions of section 36(1)(viii) of Income-tax Act in terms of which special reserve could be created by respondents out of profits of company. special reserve, in present case, relates to financial year 1996-97. respondents are in business of housing finance and they claimed deductions in sums of Rs. 10 crores and Rs. 25 crores in assessment years 2003-04 and 2004-05, respectively. special reserve fund was created under section 36(1)(viii) of Act as applicable and amounts transferred to special reserve were exempted from tax at material time. When amounts were transferred to special reserve section 36(1)(viii) read as under: "(viii) in respect of any special reserve created by financial corporation which is engaged in providing long-term finance for industrial or agricultural development in India or by public company formed and registered in India with main object of carrying on business of providing long-term finance for construction or purchase of houses in India for residential purposes, amount not exceeding forty per cent. of total income (computed before making any deduction under this clause) and carried to such reserve account: Provided that corporation or, as case may be, company is for time being approved by Central Government for purposes of this clause: Provided further that where aggregate of amounts carried to such reserve account from time to time exceeds twice amount of paid-up share capital (excluding amounts capitalised from reserves) of corporation or, as case may be, company, no allowance under this clause shall be made in respect of such excess." In effect deduction of amount not exceeding forty per cent. of profits derived from business of providing long-term finance could be carried to special reserve, created by financial corporation. deduction was admissible provided assessee is approved by Central Government. aggregate of amounts carried over to special reserve from time to time could not exceed twice amount of paid-up share capital and general reserves. Subsequently, aforesaid provision was amended by Finance Act, 1997, with effect from April 1, 1998, whereby words "and maintained" were added in section 36(1)(viii) after word "created". Thus, reserve fund created was required to be maintained. If amount so maintained was moved out of reserve fund, same would be liable to tax in that year. assessee's contention is that once it transferred amount to special reserve prior to amendment it is not prevented from using same in any manner and in instant case withdrawal of those funds, viz., Rs. 10 crores and Rs. 25 crores, respectively, would not render these amounts liable to tax. At same time, section 41 of Act was also amended and new sub-section (4A) was introduced in section 41 by virtue of which any amount withdrawn from this special reserve would be subject to tax to year in which said amount was withdrawn. amendments took effect from April 1, 1998, and would continue to apply in relation to assessment year 1998-99 and subsequent years. For ease of reference relevant section 36(1)(viii) post-amendment and section 41(4A) are reproduced below: "36. (1)(viii) in respect of any special reserve created and maintained by specified entity, amount not exceeding twenty per cent. of profits derived from eligible business computed under head 'Profits and gains of business or profession' (before making any deduction under this clause) carried to such reserve account; 41. (4A) Where 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 profits and gains of business or profession and accordingly be chargeable to income-tax as income of previous year in which such amount is withdrawn." Section 36(1)(viii), as it originally stood, merely required creation of special reserve. There was no obligation to maintain same. In order to ensure that such financial corporation maintained reserve so created, amendment was brought about and words "special reserve created and maintained" were brought into to substitute words "special reserve created". According to Mr. Gupta, learned senior counsel for appellant, Tribunal has proceeded on misapplication of law. He submitted that Commissioner of Income-tax was correct in holding that assessment was erroneous and correctly set aside assessment order dated December 16, 2005, and directed computation of total income of assessee after including amount of Rs. 10 crores withdrawn in assessment year 2003- 04 from special reserve which was admittedly created prior to April 1, 1996. Tribunal misapplied law in setting aside order of Commissioner of Income-tax and allowing appeals of assessee. Similarly, Mr. Gupta further submitted that Tribunal had held that jurisdiction under section 263 of Act by Commissioner of Income-tax was improper since two views were possible with regard to applicability of section 36(1)(viii) read with section 41(4A) and in such circumstances while deduction has been allowed in respect of special reserve created and maintained under clause (viii) of section 36(1) any amount subsequently withdrawn from special reserve shall be admitted to be profits and gain of business and, accordingly, chargeable to income-tax as income of previous year in which such amount is withdrawn. Section 41(4A), we have noted, was brought into effect by Finance Act on April 1, 1998, and it is case of respondent-assessee that this provision has no application to amounts remitted in special reserve prior to April 1, 1998. Mr. Gupta relied upon judgment of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) wherein apex court dealt with power under section 263 and held that provision cannot be invoked to correct each and every type of mistake or error committed by Assessing Officer. It is only when order is erroneous that section will be attracted. incorrect assumption of facts or incorrect application of law will satisfy requirement of rendering order erroneous. In same category fall orders passed without applying principles of natural justice or without application of mind. Mr. Gupta, therefore, sought to support his submission on basis that Malabar Industrial Co. Ltd. (supra) justifies action of Commissioner of Income-tax. Mr. Sathe, learned senior counsel appearing on behalf of assessee, contended that provisions of section 41(4A) will have no application at all since it came into effect only in 1998. amendment to section 36(1)(viii) and obligation to maintain special reserve fund also came into effect from 1998. According to Mr. Sathe, special reserve fund has been created prior to date when amendment came into force. There is no restriction on withdrawal of this amount parked in special reserve fund and withdrawal of said amount post-April 1, 1998, will not attract provisions of amended section 36(1)(viii) or provisions of section 41(4A). According to Mr. Sathe, after amendment to section 36(1)(viii), assessee is obliged to maintain fund created after that date. Section 41(4A) also does not come into effect in cases where monies were transferred to fund prior to amendment coming into effect. amounts were already parked in fund, therefore, would remain unaffected by treating such withdrawal as income by profit and gain of business for previous year in which said amount is withdrawn. In other words, amendment to section 36(1)(viii) and introduction of section 41(4A) words, amendment to section 36(1)(viii) and introduction of section 41(4A) takes effect prospectively from April 1, 1998, and not retrospectively so as to effect burden of withdrawal of Rs. 10 crores with tax. Mr. Sathe relied upon following judgments in support of his contentions: (1) CIT v. Max India Ltd. [2007] 295 ITR 282 (SC); (2) Grasim Industries Ltd. v. CIT [2010] 321 ITR 92 (Bom); (3) CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom); (4) CIT v. Industrial Finance Corporation of India Ltd. [2012] 66 DTR 490 (Delhi); (5) Kerala Financial Corporation v. CIT [2003] 261 ITR 708 (Ker); (6) Rural Electrification Corpn. Ltd., In re [2009] 312 ITR 122 (AAR); (7) T. S. Balaram, ITO v. Volkat Brothers [1971] 82 ITR 50 (SC); (8) Mepco Industries Ltd. v. CIT [2009] 319 ITR 208 (SC); (9) CIT v. Jindal Stainless Ltd. [2011] 337 ITR 495 (Delhi); and (10) Dinosaur Steels Ltd. v. Joint CIT [2012] 349 ITR 360 (SC). He submitted that when two views are possible Department ought not to exercise powers under section 263 of Income-tax Act as view taken is not prejudicial to interests of Revenue. According to him, phrase "prejudicial to interests of Revenue" under section 263 of Act has to be read in conjunction with expression "erroneous" order passed by Assessing Officer. Every loss of revenue as consequence of error of Assessing Officer cannot be treated as prejudicial to interests of Revenue. Similarly, order passed by Tribunal in favour of Assessing Officer is not to be considered as prejudicial to interests of Revenue if order was passed on basis of erroneous conclusion. After hearing both sides, we are of view that merely because, Tribunal adopts one of two views possible and that has resulted in loss of revenue it cannot be treated as erroneous order prejudicial to interests of Revenue unless view taken by Tribunal is unsustainable in law. In present case, we are unable to accept contentions of Revenue that order is unsustainable in law. We will shortly deal with reasons for arriving at this conclusion. However, before proceeding to do so we will briefly refer to some of judgments relevant to issue of two views being possible. This court held in matter of Grasim Industries Ltd. (supra) that condition precedent to exercise of jurisdiction under section 263 was that order sought to be revised must be erroneous in so far as it was prejudicial to interests of Revenue. Where two views are inherently possible and assessment could not be subjected to jurisdiction under section 263. similar view has been taken by another Division Bench of this court in CIT v. Gabriel India Ltd. (supra) this view has been consistently followed. On issue pertaining to applicability of amended provision of reserve funds created prior to amendment Delhi High Court in CIT v. Industrial Finance Corporation of India Ltd. (supra) has followed analysis of Kerala High Court in matter of Kerala Financial Corporation v. CIT [2003] 261 ITR 708 (Ker). While interpreting provisions of amendment, Kerala High Court held that amendment was prospective and would be applicable only for assessment year 1998-99 and, therefore, cannot be applied for assessment years prior thereto. said judgment has held that deduction that has been allowed in respect of amounts transferred to special reserve under section 36(1)(viii) of Act prior to amendment and which amounts were subsequently withdrawn should not be subjected to tax. Going by plain language as it stood at relevant time, it can be seen that creation of reserve was sufficient to entitle assessee to claim benefit under section 36(1)(viii) and assessee was not obliged to maintain said reserve. inclusion of words "and maintain" was not retrospective. We do not find any reason to differ from this view expressed by Kerala High Court and which was quoted with approval by Delhi High Court in CIT v. Industrial Finance Corporation of India Ltd. (supra). In present case, Mr. Sathe was also able to demonstrate from schedule forming part of balance-sheet and profit and loss account for schedule forming part of balance-sheet and profit and loss account for year ended March 31, 2003, that respondent-assessee had inserted note on accounts being note No. 19 which is reproduced below for ease of reference: "19. Special reserve has been created over years in terms of section 36(1)(viii) of Income-tax Act, 1961, out of profits of company. Special reserve No. I relates to amounts transferred up to financial year 1996-97. Whereas special reserve No. II relates to amounts transferred thereafter. In current financial year Rs. 10,00,00,000 (previous year Rs. 20,00,00,000) has been transferred from special reserve No. I to profit and loss account." This note clarifies that special reserve had been created over years out of profits and that first of these reserves relates to amount which had been transferred up to financial year 1995-96. Thus, it is not as though assessee has surreptitiously transferred any amount nor is it case of Revenue that transfer of such funds from special reserve was in any manner contrary to any law. case of Revenue is that where two views were possible, view which is prejudicial to Revenue ought not to be taken. Having considered judgment of Malabar Industrial Co. Ltd. (supra), in our view, there was no justification for invoking section 263 and setting aside order of Assessing Officer. order of Assessing Officer was upheld by Tribunal since it held one of two possible views. Neither view could be stated to be erroneous and/or prejudicial to interests of Revenue nor was order passed without following principles of natural justice or without application of mind. In circumstances even after applying test of in Malabar Industrial Co. Ltd. (supra), there appears no justification in setting aside order of Assessing Officer. For said reasons there is no justification in assailing order of Tribunal which correctly held that there was no obligation to maintain fund, when fund was created and withdrawal of fund from special reserve was before obligation to maintain fund came into effect on April 1, 1998. withdrawals that have occasioned in each of above petitions do not fall foul of law. There are no errors apparent on face of record. Accordingly, we answer question "A" and "B" in affirmative, i.e., in favour of assessee and against Revenue. appeals are, therefore dismissed. effective date of amendment should read April 1, 1998. No order as to costs. *** Commissioner of Income-tax v. LIC Housing Finance Ltd