TMI Blog2003 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... s admitted on the following question of law:- "Whether the Income-tax Appellate Tribunal was justified in its computation of gross total income for the purpose of conferral of benefit of section 80M of the Income-tax Act, 1961, without deducting the benefit covered under section 36(1)(viii) of the Act from the gross total income as provided under section 80B(5)?" The facts which are necessitous to be stated for the purpose of disposal of this appeal are that the assessee, M. P. Audyogik Vikas Nigam Limited, Bhopal (hereinafter referred to as "the Nigam"), filed its return for the assessment year 1989-90 on December 29, 1989, disclosing total income of Rs. 2,01,98,450. The Assessing Officer completed the assessment under section 144 of the Act by order dated February 20, 1992, and determined the total income at Rs. 3,00,00,000. The aforesaid determination was assailed in an appeal and the appellate authority set aside the order passed by the Assessing Officer. Thereafter, the assessment was made under section 143(3) read with section 250 of the Act and the Assessing Officer determined the total income as Rs. 2,49,89,070. It is pertinent to mention here that the income-tax return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises for consideration has been set out as question of law which has already been reproduced above. The submission of Mr. Rohit Arya, learned counsel for the Revenue is that the Tribunal has grossly erred by treating both the provisions as independent which is not so if other provisions, namely, sections 80AA, 14, 28 and 57 are read conjointly. It is contended by him that if the benefits are conferred as has been computed by the Tribunal that would amount to causing violence to the provisions of the Act and, therefore, the order passed by the Tribunal is liable to be set aside as it has grossly erred in computation of the benefit conferrable under section 80M of the Act. To buttress his submission he has placed reliance on the decision rendered in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120 (SC). Mr. G. N. Purohit, learned counsel for the assessee, has commended us to the concept of total income as provided under the Act and submitted that the computation made by the Tribunal is absolutely flawless and the reasons given by the Tribunal are covered by the decisions rendered in the cases of CIT v. M. P. Audyogik Vikas Nigam Ltd. (No. 1) [1989] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under that section shall be computed with reference to the income by way of such dividends as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) and not with reference to the gross amount of such dividends.... 80M. Deduction in respect of certain intercorporate dividends.- (1) Where the gross total income of a domestic company, in any previous year, includes any income by way of dividends from another domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of such domestic company, a deduction of an amount equal to so much of the amount of income by way of dividends from another domestic company as does not exceed the amount of dividend distributed by the first-mentioned domestic company on or before the due date. (2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year. Explanation.- For the purposes of this section, the expression 'due date' means the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on rendered in the case of General Insurance Corporation of India (No. 1) [2002] 254 ITR 203 (Bom). In the said case the Division Bench of the Bombay High Court while dealing with the deduction under section 80M held as under: "As regards question No. 2 is concerned the Assessing Officer has held that while deductions under section 80M, expenses incurred on account of salary paid to staff, stamp duty, transfer fee and safe custody charges are relatable to earning of dividend. We do not find any merit. The above expenses on account of salary paid to staff are not directly relatable to earning of dividend. So also payment of stamp duty, transfer fees and safe custody are not relatable to earning of dividend. They may be relatable to acquisition of share but not to dividend being earned." At this juncture it is worthwhile to refer to the decision rendered in the case of CIT v. Bhoruka Investments (P) Ltd. [1992] 198 ITR 734 (Cal) wherein it has been held as under: "Where a part of the dividend income is utilised for setting off loss under any other head, relief under section 80M of the Income-tax Act, 1961, is to be allowed on the dividend income before such set off subject to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the dividend, i.e., after deducting from the gross dividend the interest paid by the assessee, which is attributable to the money borrowed for the purpose of making the investment which yielded the dividend and the expenses incurred in realising the dividend income." In this context it is appropriate to refer to the decision rendered in the case of M. P. Audyogik Vikas Nigam Ltd. (No. 1) [1989] 178 ITR 177 wherein the Division Bench of this court expressed the view as under: "Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative and against the Revenue. Clause (viii) of section 36(1) of the Act provides for deduction on the basis of total income computed before making any deduction under Chapter VI-A of the Act. Total income as defined by section 2(45) of the Act means the total amount of income referred to in section 5, computed in the manner laid down in the Act. Chapter III of the Act refers to income which do not form part of total income. Chapter VI-A provides for certain deductions which are required to be made in computing total income. However, section 36(1)(viii) of the Act provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special deduction. As held in numerous cases by this court, Chapter VI-A constitutes a separate code dealing with deductions to be made in computing total income. Section 80M refers to special deduction in respect of intercorporate dividends. As held by the Bombay High Court in the case of Maganlal Chhaganlal (P.) Ltd. [1999] 236 ITR 456, in order to compute deduction under section 80M, one has to compute the amount of dividend in accordance with the Act after deducting interest on monies borrowed for earning such income. The point to be noted is that deductions contemplated by section 80M referred to actual expenditure whereas, deductions contemplated by section 20(1) are estimated proportionate expenses and interest. Therefore, one cannot import deductions from interest on securities in the case of a banking company under section 20(1) into the deductions contemplated by section 80M. In the case of CIT v. United Collieries Ltd. [1993] 203 ITR 857 the Calcutta High Court has held that the special deduction under section 80M is allowable on the net dividend which is arrived at after taking into account actual expenditure incurred by the assessee in earning the dividend income and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve funds are shown as part of the owner's interest. Our views in this regard are fortified by the decisions rendered in the cases of Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC); CIT v. Century Spg. and Mfg. Co. Ltd. [1953] 24 ITR 499 (SC); Duncan Bros, and Co. Ltd. v. CIT [1978] 111 ITR 885 (Cal); CIT v. Eyre Smelting (P.) Ltd. [1979] 118 ITR 857. In view of the aforesaid enunciation of law it rings as a bell that no actual expenditure is really contemplated when anatomy of section 36(1)(viii) is x-rayed and hence, it is inapposite to state that deduction under section 80M takes place after deducting the sum/quantum allowable under section 36(1)(viii). Presently we shall proceed to scrutinise the submissions from other spectrum. It is worth mentioning here that section 80AA remained in the statute book till April 1, 1998. The said provision laid a postulate that any deduction which required to be allowed under section 80M in respect of any income by way of dividend from a domestic company which is included in the gross total income of the assessee the deduction under that section would be computed with reference to the income by way of such dividend as c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
