COMMISSIONER OF INCOME TAX Vs. K S NARAYANAN

JUDGEMENT

(1.) AT the instance of the Revenue, the following two questions have been referred to this court under section 256(1) of the Income-tax Act, 1961"1. Whether, on the facts and in the circumstances of the case, the deduction under section 80K should be allowed on the gross dividend income before deduction of interest and brokerage or on the net dividend income?.2. Whether, on the facts and in the circumstances of the case and having regard to the provision of section 64(1)(iii) of the Act, the Appellate Tribunal was right in deleting the assessee's wife's share income from the firm of M/s Sunmar Estates and Investments clubbed with the income of the assessee ?"

(2.) IN the assessment for the assessment year 1973-74, the question was whether relief under section 80K of the INcome-tax Act, 1961, should be granted on the net dividend income or on the gross dividend income. The INcome-tax Officer had held that the relief should be granted on the basis of the net dividend income, while the Appellate Assistant Commissioner held that the relief should be granted on the gross dividend income. The Tribunal, in the appeal filed by the Revenue, followed two decisions of this court, one in Madras Auto Service v. ITO 1975 (101) ITR 589, 1975 (4) CTR 175 and the other in CIT v. Madras Motor and General INsurance Company Ltd. 1975 (99) ITR 243 and held that the reliefs under sections 80K and 80L should be computed on the gross dividend incomeThe assessee had gifted his house property at No. 3, Cathedral Road, Madras, and land appurtenant thereto to his wife on June 29, 1966. The wife continued to be the owner of the property till July 5, 1971, on which date she and her two sons formed a partnership, each having equal share in the profit and loss in the partnership business.

(3.) THAT was a case in which the assessee had gifted a sum of Rs. 60, 000 to his wife who entered into a partnership with her son and the amount gifted was contributed as her capital to the firm, and the question was as to whether the share of the wife in the firm should be assessed in the hands of the, husband. The Tribunal had held that the wife was a partner in the firm not because of her capital contribution and hence the inclusion of her share in the firm other than the interest on the sum contributed by her as capital was not justified.