TMI Blog1986 (2) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the provision of section 64(1)(iii) of the Act, the Appellate Tribunal was right in deleting the assessee's wife's share income from the firm of M/s Sunmar Estates and Investments clubbed with the income of the assessee ?" In the assessment for the assessment year 1973-74, the question was whether relief under section 80K of the Income-tax Act, 1961, should be granted on the net dividend income or on the gross dividend income. The Income-tax Officer had held that the relief should be granted on the basis of the net dividend income, while the Appellate Assistant Commissioner held that the relief should be granted on the gross dividend income. The Tribunal, in the appeal filed by the Revenue, followed two decisions of this court, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed. The interest on the amount credited to the loan account of the wife of the assessee amounting to Rs. 26,600 was clubbed with the assessee's income under section 64(1)(iii) of the Income-tax Act, 1961. The Income-tax Officer also clubbed the wife's share of profits from the firm with the income of the assessee by invoking the same provision. This clubbing of interest income with the income of the assessee was confirmed by the Appellate Assistant Commissioner. He, however, held that the share income from the partnership firm could not be clubbed with the income of the assessee. In the appeal by the Revenue, the Tribunal took the view that though the share of profits from the partnership firm had some connection with the gift made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court has now taken a different view in regard to the provisions of section 80M of the Income-tax Act, 1961, and has reversed the earlier decision of the Supreme Court in which the Supreme Court had, with reference to section 80M, also held that for the purpose of section 80M, the deduction must be made with reference to the gross dividend income and not the net dividend income. Therefore, according to the learned counsel, the decision in Madras Auto Service's case [1975] 101 ITR 589, must be held to be no longer good law. A similar argument advanced on behalf of the Revenue has been considered at length by this court in an elaborate judgment in T.C. No. 1422 of 1977 decided on December 16, 1985 (CIT v. Madras Motor and General .I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Courts were correct, it cannot necessarily lead to the conclusion that a similar construction must also be placed on section 80M which is different in material respects from clause (iv) of sub-section (1) of section 99." The judgment of the Supreme Court in Distributors (Baroda) P. Ltd.'s case [1985] 155 ITR 120 shows that that was restricted only to the construction of section 80M of the Income-tax Act, 1961, as will be clear from the following observations at page 131 : " It is section 80M which has to be construed and this section, as we shall presently show, is materially different from section 85A. We cannot construe section 80M in the light of the interpretation placed on its predecessor section by the Bombay High Court par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to the assessment year 1981-82, Parliament accepted the construction with regard to section 80K placed upon it by different courts. There is, therefore, no justification for not following the earlier decision of this court in Madras Auto Service's case [1975] 101 ITR 589. Accordingly question No. 1 has to be answered in the affirmative and against the Revenue. In so far as question No. 2 is concerned also, the matter is concluded by a decision of this court in CIT v. Chandappa Iyer [1976] 103 ITR 810. That was a case in which the assessee had gifted a sum of Rs. 60,000 to his wife who entered into a partnership with her son and the amount gifted was contributed as her capital to the firm, and the question was as to whether the share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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