TMI Blog1976 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... le Profits' under the Sur-tax Act, 1964. The 'Chargeable Profits' as defined under s. 2(5) means "the total income of an assessee computed under the Income-tax Act, 1961, (43 of 1961), for any previous year or years, as the case may be and adjusted in accordance with the previsions of the First Schedule." The total income of the company under the Income-tax Act was determined at Rs. 17,66,820 vide assessment order dated 24th Feb., 1971. By an order dated 27th Nov., 1971 under s. 154, Income-tax Act, the total income was determined at Rs. 17,64,730. The total income so determined included income by way of dividends to the extent of Rs. 89,894 which was calculated as under: Rs. Dividend Income Gross 2,25,734 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of certain inter-corporate dividends and it was submitted that 'income by way of dividends' mentioned in that section meant income by way of gross dividends. A reference was also made to r. (viii) of the First Schedule, which mentions that any sum in respect of which a deduction of income-tax is allowed under the provisions of s. 80-G of the IT Act. was to be excluded from the total income as computed for purpose of Income-tax. It was submitted that whereas a specific limit was laid down for the deduction under r. 1(vii), no such limit was laid down under r. (viii) of the First Schedule. It was pleaded that if it was the intention of the Legislation to restrict the exclusion of income by way of dividends to the extent to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om such total income" were used wherein r. 2, the words used were "the balance of the total income arrived at after making the exclusions mentioned in r. 1 shall be reduced by ………..". He submitted that the entire dividend income of Rs. 2,25,734 should not be excluded but only Rs. 89,894 which had been included in the total income alone should be excluded for purposes of r. 1(viii) of the First Schedule. 5. The learned Counsel for the assessee submitted that when our order dt. 8th Dec., 1972 came to be passed, the judgment of the Madras High Court in the case of Madras Motor General Insurance Co. Ltd.(3) was not available and since that judgement was a direct authority on the issue involved, it should be followed. He submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. South Indian Bank Ltd.(4) and the Calcutta High Court judgment in CIT vs. Darbhanga Market Co. Ltd.(5) supported the view that the entire income from dividends, namely, Rs. 2,25,734 should be excluded under r. 1(viii) of the First Schedule. He pleaded that the Bombay High Court judgment in CIT vs. New Great Insurance Co. Ltd.(6) also helped the assessee. At page 355 of the Report the true import of the words in the opening clause of s. 99(1) "amounts which are included in his total income" was considered and inspite of these words it was held that "any dividend used in s. 99(1)(iv) of the IT Act meant the gross dividends. It was, therefore, pleaded that the order of the AAC was correct and did not call for any interference. 6. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the cases of (i) The New Great Insurance Co. Ltd.(6) (ii) Indian Guarantee and General Insurance Co. Ltd.(6), was not made available to us. These judgments are now reported in (1973) 90 ITR 348. The question involved in all the three cases was whether the dividend income received by the three companies was wholly exempt from super-tax either under the provisions of s. 99(1)(iv) (as it then stood) of the IT Act, 1961, or under s. 85 of the said Act. It was held that" the words used in s. 99(1)(iv) are 'any dividends received by it' and in the context in which it is used 'any dividend' must necessarily imply all dividends received by the assessee from an Indian Company. The word 'dividend' is unqualified and it can mean only one thing, name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the total income of the assessee, deductions specified under Ss. 80-C to 80-U have to be made from the gross total income. If the total income is computed in this manner, then naturally the deduction under 80-M will have to be made in respect of the gross dividends. The assessee's contention that the computation of chargeable profits as made by the ITO is not in consonance with the scheme of Ss. 80A 80B is correct. If total income for purposes of IT Act is made on the basis of r. 80A and 80B and if the department's own interpretation that for purposes of s. 80-M the gross dividends are to be considered, there will be no scope for not excluding the gross dividends under r. 1(viii) of the First Schedule to the Companies (Profits) Sur-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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