TMI Blog2013 (1) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Revenue did not conduct an enquiry to determine the actual expenditure incurred in earning the dividend income by the assessee, which is a manufacturing concern and also deals in trading of the hosiery goods. It is not an investment company. It has been the categorical stand of the respondent-assessee that the investment, on which the dividend income is earned, was old and the total dividend warrants received by the assessee were only 2 to 3 on the shares held of the sister concern. The appellant's counsel urged that the ITAT or for that matter CIT(A) had no basis before them to determine the expenses incurred in earning dividend income by approximation but we find that for that matter the grievance could be raised by respondent asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I) reduced the proportionate amount out of personnel, administrative miscellaneous and financial expenses to determine the 'net dividend' permissible for deduction under Section 80M of the IT Act. The said amount was determined at Rs. 11,81,025/-, which was reduced from the elible dividend of Rs. 81.99 lacs and deduction was allowed to the respondent-assessee to the tune of Rs. 70,18,975/- under Section 80M of the IT Act as the 'net dividend' income. 4. In appeal the Commissioner of Income Tax (Appeals) [CIT (A)] held that only the financial expenses incurred by the assessee could be taken into consideration for working out the deduction and not the personnel and administrative miscellaneous expenses. The disallowance by the CIT(A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, the Income Tax Appellate Tribunal is justified in restricting the disallowance u/s 80M to the extent of Rs. 1,00,000/- instead of upholding the total disallowance of Rs. 6,66,035/- made by the A.O. being proportionate expenses? Similar question has been proposed in the other connected appeals. 7. It was vehemently contended by learned counsel for the Revenue that the gross dividend income of respondent-assessee varies exorbitantly in each of the assessment years, in question, and thus determination of allowance by the authorities below, by estimation or guess work, is absolutely illegal and that AO was quite correct in determining the disallowance, based on sound reasons by taking into account the amount, propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual expenditure incurred are to be taken into consideration. There is no question of taking expenditure on estimate or presumption basis while computing dividend income or while allowing deduction under s. 80M of the IT Act. (v) That where shares are acquired out of borrowed funds, on which dividend is received, deduction of interest paid can be allowed under s. 57, provided loan was taken for making and earning dividend income. There is no question of deduction of any amount paid as interest, to which provisions of s. 36(1)(iii) are applicable, while computing deduction under s. 80M of the IT Act. (emphasis supplied) 47. In the light of above propositions, I am unable to agree with the order of the Tribunal for asst. year 1990-91 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend of Rs. 54,000 and Rs. 93,08,912 respectively which was exempted from tax. The AO estimated a sum of Rs. 1,00,000 having been incurred by the Assessee for earning such exempt income and accordingly, made an addition under Section 14A of the Act. Out of the sum of Rs. 1,00,000, Rs. 65,000 was considered as interest expenditure relatable to the borrowed capital used for investment in the securities yielding exempt income and Rs. 35,000 was estimated out of the administrative expenses. The CIT(A) has deleted the addition on the ground that the investments have been made from funds on which no interest has been paid. The CIT(A) also noticed that the AO has not backed his assertion that investments were made from combined funds of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue did not conduct an enquiry to determine the actual expenditure incurred in earning the dividend income by the assessee, which is a manufacturing concern and also deals in trading of the hosiery goods. It is not an investment company. It has been the categorical stand of the respondent-assessee that the investment, on which the dividend income is earned, was old and the total dividend warrants received by the assessee were only 2 to 3 on the shares held of the sister concern. The appellant's counsel urged that the ITAT or for that matter CIT(A) had no basis before them to determine the expenses incurred in earning dividend income by approximation but we find that for that matter the grievance could be raised by respondent assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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