TMI Blog1995 (11) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the relief under section 80M of the Income-tax Act, 1961 should be computed on the gross dividend or after deducting the proportionate expenditure as on by the Income-tax Officer ? 2. The brief facts relating to both the assessees are that in the assessment years 1985-86 and 1986-87, the assessee claimed deduction under section 80M of the Act on the gross dividends of ₹ 37,708, ₹ 22,490, ₹ 1,99,500 and ₹ 2,49,500. The ITO, however, held that a part of the expenditure booked by the assessee was attributable to earning of the dividend income and in the absence of any apportionment in the books of account he estimated such expenditure at the rate of 5 per cent of the gross dividends. Aggrieved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years 1985-86 and 1986-87 on the gross dividends of ₹ 37,708 and ₹ 22,490, respectively. Consequently, the Income-tax Officer shall recompute the unabsorbed deduction under section 80M to be carried forward. Against the order of the Commissioner (Appeals), department filed appeal before the Tribunal. The learned counsel for the revenue submitted that for the purpose of relief under section 80M the proportionate expenditure allocable for earning dividend income has to be deducted from the gross amount of dividend in view of section 80AA of the Act which was inserted with retrospective effect from 1-4-1968. 4. The Tribunal after considering the rival contentions of the parties have held that: the assessees are fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held in the case of CIT v. New India Investment Corpn. Ltd. [1978] 113 ITR 778 (Cal.) that, where the shares and securities are held as stock-in-trade and not by way of investment only, there is no scope for apportionment of the expenditure between the dividend income and business income. This view is not in conflict with the decision of the Supreme Court in Distributors ( Baroda) ( P.) Ltd. v. Union of India [1985] 155 ITR 120 or the provisions of section 80A(2), read with section 80M(5) because in the type of cases like the instant case the dividend income as such cannot have any outgoing, so the question of deducting the gross dividend to net dividend did not at all arise. 6. With regard to the first question, the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were as follows : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the Commissioner (Appeals) that though the income from dividends has to be assessed under a separate head, expenses incurred for the purpose of earning income from investments in shares should be allowed against income from dividend from such shares ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the Commissioner (Appeals) that deduction under section 80M of the Income-tax Act, 1961 should be allowed on the gross amount of dividend received by the assessee and not on the net amount of dividend computed after deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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