COMMISSIONER OF INCOME TAX Vs. VARADARAJAN M

JUDGEMENT

(1.) THE facts leading up to this reference are these ; THE assessee is an individual deriving income from salary and other sources, viz., annuities, directors' sitting fees and dividends on the shares. For the assessment year 1968-69, the total income was computed by the ITO at Rs. 57,880 and for the assessment year 1969-70 at Rs. 62,510. THE ITO allowed deductions of Rs. 10,610 for the assessment year 1968-69 and Rs. 11,106 for the assessment year 1969-70 under Section 80K of the I.T. Act while computing the total income. THE Addl. CIT issued under Section 263 of the Act a notice to the assessee for revising the order of assessment. THE assessee contested the proposed action contending that all that Section 80K lays down is that the gross total income from dividends is entitled to the relief mentioned in the section and, therefore, he was entitled to deduction under Section 80K in respect of the amounts received by him as dividends. Rejecting that contention, the Addl. CIT directed the ITO to modify the assessments in respect of the two assessment years by withdrawing the deductions allowed under Section 80K of the Act and revise the tax demand for the two years accordingly. THE assessee then preferred an appeal before the Income-tax Appellate Tribunal and the Tribunal allowed the appeal holding that " Section 80K applies when the gross total income includes any income by way of dividends." At the instance of the Addl. CIT the following question has been referred under Section 256(1) of the Act, by the Tribunal for our decision :

(2.) MR.Ramarao, the learned counsel appearing for the revenue, contended that the assessee is not entitled to the benefit of Section 80K, as there would be no dividend income when the income chargeable under the head " Income from other sources " is computed alter giving Mm deduction in respect of the interest paid on amounts borrowed for the purpose of investment.

(3.) " Gross total income " is defined in Section 80B to mean the total income computed in accordance with the provisions of the Act, before making any deduction under Chapter VI-A or under Section 280-O. The relevant section under which deduction is claimed and which calls for interpretation by us is Section 80K which is in these terms;