TMI Blog1993 (3) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 80K on the gross dividend income without taking into account deduction for expenses incurred for earning the same ?" The assessee is an individual who carries on the business of sale and purchase of shares. In the assessment year 1974-75 (corresponding previous year being year ended on October 26, 1973), the assessee received the following income under different heads : Rs. Ready share income 2,49,606 Speculation business income 1,68,969 Dividend income 6,72,220 ------------------ Total 10,90,795 ----------------- The assessee claimed deduction on account of the following expenses incurred for the purpose of its business Rs. Brokerage 345 Share transfer expenses 4,066 Interest 8,23,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al expenses of Rs. 8,28,297 comprising brokerage, transfer fees and interest were incurred in course of speculation and ready business of the assessee, the income from which itself amounted to more than Rs. 4 lakhs. It was further observed that the assessee was not required to incur any of these expenses for the purpose of earning the dividend income as such. The Appellate Assistant Commissioner, therefore, held that the Income-tax Officer's method of computation of total income under these different heads dividing the total expenditure against these heads was not correct and that, in any event, the Income-tax Officer was bound to allow deduction at least in respect of the dividend income computed by him. He, therefore, allowed the appeal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80K, so far as relevant, reads : "Where the gross total income of an assessee ...- includes any income by way of dividends . . . . there shall . . . . be allowed, in computing his total income, a deduction from such income by way of dividends of an amount equal to such part thereof as is attributable to the profits and gains derived by the company from an industrial undertaking . . . . " The expression "gross total income" has been defined in section 80B(5) of the Act to mean the total income computed in accordance with the provisions of the Act before making any deduction under Chapter VI-A or section 280-O. Section 4 of the Act, which is the charging section, imposes income-tax upon a person in respect of his total income. Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) laid out or expended wholly and exclusively for the purpose of making or earning such income : Provided that nothing contained in clause (i) or clause (iii) shall apply in computing the income by way of dividends in the case of an assessee, being a foreign company. Explanation.-For the purposes of this section and section 58, `foreign company' shall have the same meaning as in section 80B." Section 58 specifies the amounts which are not deductible in computing income from other sources, notwithstanding anything to the contrary contained in section 57 of the Act. It may be noted that there is a marked difference between the language of section 37(1) and section 57(iii) both of which are residuary provisions to allow deduction in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of the business. As pointed out earlier, it is well-settled that the expression "for the purposes of the business" is wider in scope than the expression "for the purpose of earning profits". Expenditure incurred by the assessee in the instant case is for the purpose of carrying on of the business of shares. There is nothing to show that any part of it was incurred for earning dividend income. The expenditure incurred by the assessee on account of brokerage, share transfer expenses and interest evidently does not fall under either of the two clauses of section 57 of the Act, viz., clauses (i) and (iii). That being so, it is not allowable as a deduction in the computation of dividend income. The Income-tax Officer, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erspective. We, therefore, reframe the question as follows : " Whether, on the facts and in the circumstances of the case, and having regard to the definition of 'gross total income' under section 80B(5) of the Income-tax Act, 1961, the Tribunal was justified in upholding the deduction under section 80K from the dividend income of the assessee without deducting therefrom the pro rata expenditure incurred by the assessee on brokerage, share transfer fees and interest ?" In the light of the above discussion, we answer the question as reframed by us in the affirmative, that is in favour of the assessee and against the Revenue. Under the facts and circumstances of the case we make no order as to costs. - - TaxTMI - TMITax - In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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