COMMISSIONER OF INCOME TAX Vs. CHEMICAL HOLDINGS LIMITED

JUDGEMENT

(1.) THE assessee is a dealer in shares. For the assessment year 1980-81, it reported a dividend income of Rs. 3,61,500. It claimed a deduction under Section 80M of the Income-tax Act, 1961, as it then stood. Section 80M of the Act in so far as it is applicable to the case of the assessee provides for the deduction of 60 per cent, of the income received by way of dividends from other domestic companies. THE computation of the deduction under Section 80M is required to be made in accordance with Section 80AA.

(2.) SECTION 80AA captioned as computation of deduction under SECTION 80M reads as under :

(3.) THE extent of benefit allowed by Parliament for dividend income is an amount, which is required to be calculated with reference to the net dividend. THE Act prescribes the amounts, which are deductible from the gross dividend to arrive at the figure of the net dividend. That computation must necessarily be done before determining the amount on which deduction under Section 80M can be allowed. It is not possible to hold that an assessee has, by reason of being a dealer in shares, an option not available to other assessees also deriving income from dividends, to deduct the interest paid on the amount borrowed for investing in the shares for which dividend is earned as expenditure in relation to his business, and deduct the same under Section 36(1)(iii).