TMI Blog2004 (10) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... aise per Rs. 100 of dividend income be taken for deduction under section 80M - - - - - Dated:- 11-10-2004 - Judge(s) : A. M. SAPRE., ASHOK KUMAR TIWARI. JUDGMENT The judgment of the court was delivered by A. M. Sapre J.- This is a reference made under section 256(1) of the Income-tax Act, 1961, at the instance of the assessee by the Tribunal by their order, dated July 2, 1998, passed in R. A. Nos. 161 and 162/Ind/1997 which arise out of an order passed by the Tribunal, dated August 5, 1997, in I.T.A. Nos. 210 and 211/Ind/1992 to this court for answering the following question of law: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the order of the lower authorities and holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate expenditure incurred for earning dividend income. The assessee felt aggrieved, filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) by his order dated February 13, 1992 (annexure, B2), partly allowed the appeal. He held that no part of interest paid by the assessee should be reduced from the gross amount of dividend earned by the assessee. So far as expenditure was concerned, the Commissioner of Income-tax (Appeals) held that deduction on account of collection should be restricted to 10 paise per Rs. 100 of the dividend income. In other words, in the opinion of the Commissioner of Income-tax (Appeals), the Assessing Officer should take 10 paise per Rs. 100 as an expenditure incurred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure for every Rs. 100 for the purpose of deduction. This, according to learned counsel, is neither legal nor proper. It was further contended that such course adopted by the Assessing Officer is neither recognised by section 80M nor by section 57(1) ibid so as to make it an acceptable deduction from the gross income of dividend earned by an assessee. Learned counsel further contended that the assessee being a bank does not, as a fact, incur any expenditure either at the time of earning or while depositing in their account or has, in fact, incurred any expenditure as such in the assessment year in question and hence, the Assessing Officer ought not have taken 10 paise as an expenditure said to have been incurred for earning Rs. 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible under section 80M is liable to be calculated with reference to the dividend income computed in accordance with the provisions of the Act and not with reference to the full amount of dividends received by an assessee. Since the view taken by the Gujarat High Court was against the assessee and hence, the matter was taken to the Supreme Court at their (assessee) instance in appeal. The Supreme Court overruled the view taken by the Gujarat High Court [Cloth Traders (P) Ltd. v. Addl. CIT [1979] 118 ITR 243 (SC)] and held that the deduction required to be allowed under section 80M must be calculated (headnote) "with reference to the full amount of dividends received from a domestic company and not with reference to the dividend income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A inasmuch as the same is in the nature of explaining the correct interpretation of section 80M and hence, declaratory in nature. Lastly, while re-interpreting section 80M, their Lordships held that: "While enacting section 80M, the Legislature intended to grant relief with reference to the amount of dividend computed in accordance with the provisions of the Act and not with reference to the full amount of dividend received from the paying company." So, the law laid down by the Supreme Court, in the case of Distributors (Baroda) [1985] 155 ITR 120, is that income derived by way of dividends has to be computed in accordance with the provisions of the Act for the purpose of granting benefit under section 80M. Section 56 of the Act deals w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icult for us to hold that some hypothetical and/or notional expenditure can be made a basis for deduction. In other words, we have not been able to notice any provision which may entitle the taxing authorities to work out by way of expenditure any notional figure for the purpose of section 80M though, in fact, it has not been so incurred by an assessee while encashing the dividend. In somewhat similar circumstance, this question had come up for consideration thrice before the Calcutta High Court. These cases are- CIT v. National and Grindlays Bank Ltd. [1993] 202 ITR 559; CIT v. United Collieries Ltd. [1993] 203 ITR 857 (Cal) and lastly CIT v. Enemour Investments Ltd. [1994] 72 Taxman 370 (Cal). In all the three cases, their Lordships of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
