COMMISSIONER OF INCOME TAX Vs. UNITED COLLIERIES LTD

JUDGEMENT

(1.) This reference under Section 256(2) of the Income-tax Act, 1961, relates to the assessment years 1982-83 and 1983-84. The facts are that the assessee-company disclosed dividend income of Rs. 42,680 and Rs. 47,680, respectively, for the two years under reference. The Income-tax Officer computed proportionate expenses for earning such dividend at Rs. 8,099 and Rs. 15,250, respectively, and deducted these amounts from the gross dividend of Rs. 42,680 and Rs. 47,680, respectively, computing the net income from dividend at Rs. 34,581 and Rs. 32,420, respectively, for the assessment years 1982-83 and 1983-84. Thereafter, he allowed deduction under Section 80M of the Income-tax Act, 1961,. on such net income from dividend for both the years under reference.

(2.) On appeal by the assessee, the Commissioner of Income-tax (Appeals) observed that there was no fresh investment during the assessment years in shares wherefrom any dividend has been earned. Hence the expenses other than those admitted by the assessee as having been incurred for earning dividend should not be deducted in order to compute relief under Section 80M. In other words, the relief should not be reduced by the amount of estimated expenses by the Income-tax Officer as for earning of the dividend income for the assessment years 1982-83 and 1983-84. The Commissioner of Income-tax (Appeals) decided the issue in favour of the assessee.

(3.) On appeal by the Department, the Tribunal observed that it is a well-settled principle now that deduction under Section 80M of the Income-tax Act, 1961, requires to be allowed on the gross dividend instead of deducting the allocation of expenses incurred in earning the dividend income. Thus, the Tribunal dismissed both the appeals preferred by the Department.