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TMI Blog2010 (5) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... eading to the receipt of substantial dividend income. In fact, during the relevant assessment year 1995-96, as against the declared business income of around ₹ 7.4 crores, the dividend income declared was as much as ₹ 10.8 crores, which is more than the business income. When the assessee claimed deduction under section 80M on the gross dividend amount, the Assessing Officer, by relying on section 80AA, restricted it to the net dividend, that is, on the net amount of dividend computed after deducting estimated expenditure for earning the dividend income. Even though the first appeal was rejected, the Tribunal, by relying on two decisions of the Madhya Pradesh High Court, one in CIT v. Madhya Pradesh Audyogik Vikas Nigam Ltd. [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 80M on dividend income is admissible only on the dividend computed in accordance with the provisions of the Income-tax Act and not with reference to gross dividend. In view of the decision of the Supreme Court and the express provision contained in section 80AA, which was in the statute during the assessment year involved in this case, the assessee is entitled to deduction only on the net dividend income computed in accordance with the provisions of the Act and not with reference to the gross dividend based on which claim is made and allowed by the Tribunal. However, the question to be considered is whether in the facts of this case the Assessing Officer was justified in estimating the actual expenditure attributable for earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee but also by the Assessing Officer. Assessee certainly cannot claim that they have no expenditure for earning dividend income, which, as already noted by us during the relevant previous year, was more than the business income. However, the entire expenditure debited in the profit and loss account was claimed and got allowed in the computation of business income because, no disallowance is made while computing business income as attributable to earning of dividend income. Even though the Assessing Officer, without dispute, allowed the entire expenditure claimed in the computation of business income, he made an estimate of expenditure attributable to investment income and reduced that from the gross dividend for the purpose of granti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 80M was also claimed on the gross dividend income. On a reading of section 80AA extracted above, we are of the view that, irrespective of whether assessee make specific claim of any deduction in the computation of dividend income under Chapter IV-F, the Assessing Officer is bound to consider whether assessee has, under any other head, claimed deductions, which are allowable on the computation of dividend income under the provisions of the Act and if so, to reduce such deductions and take into account only the net dividend, on which, deduction under section 80M is allowable as provided in section 80AA of the Act. Of course, if the assessee has not claimed any deduction while preparing the profit and loss account, then there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred and allowed in the computation of business income between expenditure attributable for earning business income and for earning dividend income is done in an arbitrary manner. Since none of the lower authorities considered the reasonableness of the estimate, which is nothing but part of the actual expenditure incurred and allowed in the computation of total income, we have to necessarily remand the matter to the Assessing Officer to bifurcate the expenditure that are admissible in the computation of business income and expenditure that are admissible in the computation of dividend income and to make fresh assessment. The Assessing Officer shall make fresh assessment computing income from business and income from dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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