TMI Blog1977 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, etc., as provided under section 57 of the Income-tax Act. For the computation of the income-tax assessment, dividend income was taken into account without any deduction, while computing the gross total income of the assessee as defined by section 80B, clause (5). The gross total income inclusive of the amount of dividend came to Rs. 8,38,166. The assessee also claimed deduction from this amount under sections 80L and 80M being dividend income from inter-corporate dividends. The claim was allowed to the extent of Rs. 3,000 and Rs. 1,00,922, respectively, and the net income was arrived at for the purpose of income-tax at Rs. 7,33,839. On this income, surtax payable had to be calculated under the provisions of the Companies (Profits) Surtax Act, 1964. The Income-tax Officer did this by computing the chargeable profits by a process of deduction from the total income as computed under the Income-tax Act, only a sum of Rs. 67,282 under rule 1(viii) of the First Schedule to the Surtax Act, and the figure of Rs. 67,282 represented the dividend income of Rs. 1,71,204 less the relief under section 80L and section 80M. The assessee contended that the deduction under this rule would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 ; and the integral connection with the Income-tax Act is further emphasised by clause (9) of section 2 of the Act. Turning now to the Income-tax Act, 1961, section 2, clause (45), defines " total income ". Section 10 provides for incomes which do not form part of the total income. Section 14 provides for the various heads of income. Six different heads of income are referred to in the section. The sections that follow are related to, and treat of, these heads of income. Among the last of these heads, viz., "Income from other sources", one of the sources is income from dividend. This is treated in sections 56 and 57, section 56 dealing with the various other sources of income and listing dividends as one such source, and section 57 providing for deduction in respect of income from dividends among others. We then have section 80M which provides for deduction in respect of certain inter-corporate dividends and which reads as follows: "80M. Deduction in respect of certain inter-corporate dividends.- (1) Where the gross total income of an assessee being a company includes any income by way of dividends from a domestic company, there shall, in accordance with and subject to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Surtax Act are ascertained, the latter Act ordains and provides for an adjustment in the mode and manner indicated by the First Schedule. Turning to clause (viii) thereof, we see no warrant to detract from the generality of the words "income by way of dividends" and to confine these words only to such income as had been reduced by applying the provisions of section 57 or section 80M or any other provisions of the Income-tax Act. This conclusion strikes us on a reading and understanding of the provisions of the Act, and we do not think that the said conclusion should in any way be affected or blurred by the citation of the authorities to which we may briefly now turn. Our attention was first drawn to an unreported judgment of our learned brothers, Poti and Bhaskaran JJ., in I.T.R. No. 17 of 1972. The question referred for determination was : " Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee-company is eligible for deduction only of Rs. 15,885, that being 60 percent. of the net dividend of Rs. 26,475 under section 80M of the Income-tax Act, 1961, and not to a deduction of 60 per cent. of Rs. 65,507 under the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany subject to the provisions contained in the Fifth Schedule." The Finance Act of 1964 amended this provision by substituting the following clause (iv): " If the assessee is a company, any dividend received by it from an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India." We reproduce the section only to emphasise the language of the section on which the decision rested ; we will also point out that there was no reference in the decision to section 80M of the Income-tax Act. Commissioner of Income-tax v. New Great Insurance Co. [1973] 90 ITR 348 (Bom), a decision of the Bombay High Court, was the decision next cited. The assessment year was 1963-64. The decision turned on section 85A and section 99(1)(iv) of the Income-tax Act, 1961. The statutory provision with which we are here concerned did not come up for examination. For the said reason, we do not think that the decision of the Calcutta High Court also cited to us in Commissioner of Income-tax v. Darbhanga Marketing Co. Ltd. [1971] 80 ITR 72 (Cal) is of much assistance. The assessment year was 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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