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TMI Blog1979 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... at after deducting the interest payable on loans taken for the purchase of the shares ? " The question referred relates to the assessment year 1972-73. The assessee had purchased shares of J. K. Synthetics Ltd., and for making the purchase, had borrowed certain amounts of money bearing interest. In the relevant previous year the assessee received an amount of Rs. 3,24,238 as dividend from M/s. J. K. Synthetics Ltd. The assessee claimed that this amount be deducted from its income under s. 80K while computing its income. The contention was, however, rejected by the ITO on the ground that no certificate had been issued for the assessment year either provisionally or finally by the ITO assessing the company, and further that, in any event, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es had to be deducted from the amount of dividend received, it held following the decisions of the Madras High Court in the cases of CIT v. Madras Motor and General Insurance Co. [1975] 99 ITR 243 and Madras Auto Service v. ITO [1975] 101 ITR 589 that the interest could not be deducted for purposes of calculating the relief under s. 80K. The Commissioner has now come up in reference before us. The field of controversy appears to be covered by the decision relied upon by the Tribunal, and the view taken conforms with the statutory provisions. We may also briefly give our reasons for upholding the view of the Tribunal. The relevant part of s. 80K under which relief was being claimed was as under : " 80K. Deduction in respect of dividends at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which a deduction is allowable under section 80K shall be determined in accordance with sub-rules (2) to (5). (2) The aggregate of that part of the profits and gains of the company of the relevant previous year and of the previous years preceding the relevant previous year, on which no tax was payable by it under section 84 of the Act or under sub-section (1) of section 15C of the Indian Income-tax Act, 1922 (11 of 1922), or, as the case may be, in respect of which a deduction is allowable under section 80J of the Act, shall first be ascertained. (3) From the amount ascertained as in sub-rule (2) there shall be deducted the aggregate of the amounts of dividends, paid or deemed to be paid by the company in respect of the said preceding pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the order of the Tribunal it appears that the Commissioner, Kanpur, had issued an order directing the ITO assessing J. K. Synthetics to pass an order under s. 197(3), and determining the portion of dividend paid by a company which would be exempt under s. 80K in the hands of the shareholder. Thus, one has to proceed on the footing that the dividend received by the assessee was one in respect of which M/s. J. K. Synthetics Ltd. was entitled to deduction under s. 80J. Rule 20 sets out the computation of the portion of dividend attributable to the profits and gains from a new industrial undertaking. There is no suggestion, and it is not the department's case that the amount of Rs. 3,24,238 received by the assessee as dividend from M/s. J ..... X X X X Extracts X X X X X X X X Extracts X X X X
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