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Commissioner of Income Tax-10, Mumbai Versus M/s Indian Oil Corporation Ltd.

2015 (7) TMI 572 - BOMBAY HIGH COURT

Entitlement to deduction of gross dividend under Section 80-M - Whether Tribunal was correct in allowing the deduction whereas the Apex Court had in Distributors Baroda Pvt. Ltd. (1985 (7) TMI 1 - SUPREME Court ) held that only net dividend is deductible? - Held that:- It is undisputable that the Hon'ble Supreme Court in Distributors (Baroda) Pvt. Ltd. (supra) has held that deductions under Section 80-M would not be of the gross amount but of the net amount of dividend received i.e. after deduct .....

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e no application in the present facts and hence gross dividend and net dividend received is the same. In the present facts, as amply demonstrated in the impugned order, the respondent-assessee had its own funds available to make the investment. Therefore, the presumption as set out in Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) would apply, which presumption the revenue has not disturbed. Moreover, for the earlier assessment year, the revenue has extended the benefit of .....

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wn decision in the case of Hindustan Petroleum Corpn. Ltd. [1989 (7) TMI 150 - ITAT BOMBAY-B ]. In the above decisions wherein in respect of identical issue, this Court has held that deduction under Section 80I of the Act refers to profits and gains from industrial undertaking. It held that manufacturing, processing and marketing are part of the industrial undertaking.- Decided against revenue. - Income Tax Appeal No. 1372 of 2013 - Dated:- 29-6-2015 - M. S. Sanklecha And N. M. Jamdar, JJ. For t .....

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s of the case and in law the Tribunal was correct in holding that the respondent Company was entitled to deduction of gross dividend under Section 80-M, whereas the Apex Court had in Distributors Baroda Pvt. Ltd. (155 ITR 120) held that only net dividend is deductible? (2) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the profits of the Marketing Division of the respondent Company are entitled for deduction under Section 80IB, whe .....

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ance on the judgment of the Supreme Court in Distributors (Baroda) P. Ltd. v/s Union of India & ors., reported in 155 ITR 120. Consequently, the Assessing Officer disallowed an estimated expenditure of 2% of administrative and other expenses including salaries, Provident Fund, etc. The Assessing Officer did not accept the respondent's contention that as no expenditure was incurred for earning the dividend income in the subject assessment year, no administrative expenditure could be attri .....

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s the fact that further amount of ₹ 680 crores invested during the subject assessment year. All other investments were made during the earlier years. However, it is recorded by the Tribunal that for the earlier assessment year no disallowance was made on account of interest or any other expenses while allowing the claim for deduction of dividend received on gross basis under Section 80-M of the Act. Besides, during the subject assessment year and earlier, the assessee's own funds were .....

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2.36 15311.03 9721.72 4264.23 *1,201.99 2003-2004 778.67 18149.32 18927.99 5363.08 7771.17 717.36 Further, the Tribunal also records the fact that most of the borrowings which were taken for import of crude oil and financing projects have been repaid in the earlier years. On the aforesaid facts, the Tribunal placed reliance on the principles set out by this Court in C.I.T. v/s Reliance Utilities & Power Ltd., 313 ITR 340, that if there are sufficient interest free funds available with an ass .....

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sis and not on gross basis as claimed under Section 80-M of the Act. (e) It is undisputable that the Hon'ble Supreme Court in Distributors (Baroda) Pvt. Ltd. (supra) has held that deductions under Section 80-M would not be of the gross amount but of the net amount of dividend received i.e. after deducting the interest paid on monies borrowed. In the facts before the Hon'ble Apex Court, the Distributors (Baroda) Pvt. Ltd. borrowed to invest in shares for earning dividend income. Thus the .....

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