TMI Blog1998 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is a dealer in shares ?" The assessee is a private limited company carrying on the business of manufacturing of drums and barrels, dealing in shares and investing in shares. The controversy is regarding deduction of interest on money borrowed for purchasing shares from the dividend income for the purposes of calculating deduction under section 80M(1) of the Income-tax Act, 1961, ("the Act"). The assessee claimed deduction under section 80M on the gross dividend income. The Income-tax Officer did not accept this claim. He allowed deduction on the net amount of dividend arrived at after deducting interest on the money borrowed for purchasing shares and other expenses. The interest on loans obtained for purchasing shares was Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case should be allowed on the gross dividend without deducting interest on borrowed money, he relies on the decision of the Calcutta High Court in CIT v. National and Grindlays Bank Ltd. [1993] 202 ITR 559. We have considered the rival submissions and the decisions relied upon by learned counsel for the parties. We have perused the decision of the Supreme Court in Distributors (Baroda) Pvt. Ltd. v. Union of India [1985] 155 ITR 120, and on a careful consideration of the same, we are of the clear opinion that the controversy in this case is squarely covered by the ratio of the said decision wherein it has been held that deduction under section 80M(1) of the Income-tax Act, 1961, has to be calculated with reference to the amount of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rowed for earning such income, and not with reference to the full amount of dividend received by the assessee. We have also considered the decision of the Calcutta High Court in CIT v. National and Grindlays Bank Ltd. [1993] 202 ITR 559, wherein it has been held that relief under section 80M is admissible on the gross amount of dividend income without deducting therefrom the interest paid for earning the dividend. In that case, the decision of the Supreme Court in Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120, was not brought to the notice of the court. The above decision of the Calcutta High Court, appears to be inconsistent with the decision of the Supreme Court in Distributors (Baroda) P. Ltd. v. Union of India [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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