TMI Blog1993 (2) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... n the dividend income of Rs. 91,100. " 2. The assessee is a Private Limited Company. It is a partner in a firm, M/s. Premchand Raichand Co., hereinafter referred to as "PRC". PRC held certain shares in Industrial Investment Trust and Century Enka on which gross dividend of Rs. 3,92,338 was received, the tax deducted at source being Rs. 27,936, leaving thereby the net receipt of Rs. 3,64,402. Besides the dividend income, PRC had income from house property of Rs. 36,178, business loss of Rs. 2,51,092 ; the net income being Rs. 1,49,488. The registered firm tax was paid at Rs. 30,710 and the net income of Rs. 1,49,488 was distributed/allocated amongst the partners. The assessee's share being 25 per cent, an amount of Rs. 37,372 came to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r again In the hands of the partner. Consequently, he directed to allow relief under section 80M of the Act. 4. The learned Departmental Representative, Sri N.A. Kazi submitted that the assessee is not entitled to the deduction because it is not the owner of the shares. The owner, according to him, is the firm and not the assessee. Section 80M, according to him, allows deduction from company to company and not through the media of a firm to the partners. In any case, he submitted that the deduction cannot exceed Rs. 25,429 which is the income from the firm added to the assessee's income and forming part of its gross total income. The learned Departmental Representative relied upon the decision of the Supreme Court in Distributors (Baroda) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re heard and their rival submissions considered. The records of the case as also the judgments relied upon were gone through. The question to be decided is as to whether the deduction under section 80M of the Act can be claimed by an assessee in respect of the dividend received by the firm in which the assessee is a partner. Section 80M deduction is allowable to a company and not to a firm. It is an inter-corporate dividend deduction. As it stood at the relevant time, the section reads as under: " 80M. Deduction in respect of certain inter-corporate dividend.--Where the gross total income of an assessee, being a domestic company includes any income by way of dividend from a domestic company, there shall be allowed, in computing the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to the decision of the Allahabad High Court in the case of Brij Raman Das, wherein the claim under section 80L of the Act was held allowable to the partner, out of the share income of the firm which included interest income entitled to 80L deduction. In the case of R.M. Chidambaram Pillai, the partner received salary from a firm which grew and sold tea and the Supreme Court allowed exemption under Rule 24 of the Indian Income-tax Rules, 1922, to the extent of sixty per cent thereof, representing agricultural income from the share of profit of the partner allocated by the firm. The contention of the learned Departmental Representative that the assessee's gross total income included share of profit from the firm which could not be equate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent of such income. As already been held in the earlier paragraph, the share income of the assessee, representing the receipt of dividend income by the assessee, it cannot be disputed that the assessee's gross total income included income by way of dividend from a domestic company. If the gross total income includes any income by way of dividend, in that situation, the assessee would be entitled to the benefit of deduction under section 80M of the Act. The question whether the assessee-company is the owner of the shares from which dividend income is derived is immaterial for deciding whether the assessee is entitled to inter-corporate dividend deduction or not. The condition precedent for granting deduction under section 80M of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as determined in the case of the firm, M/s. Premchand Roychand Co. Rs. 37,372 Less : Expenses as per details under the head Administrative expenses. Rs. 11,923 ------------------- Rs. 25,449 Income from other sources -- Dividend. Rs. 1,500 ------------------- Rs. 26,949 " ------------------- The gross total income of the assessee was Rs. 26,949. The Assessing Officer has already allowed sixty per cent deduction in respect of dividend received of Rs. 1,500, which has directly been received by the assessee. This leaves a balance of Rs. 25,449. This alone could be said to have been included in the gross total income of the assessee and not the gross dividend of Rs. 91,100, on which deduction has been allowed by the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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