COMMISSIONER OF INCOME TAX Vs. PUNJAB TRACTORS LTD.

JUDGEMENT

(1.) THE Revenue is in appeal under s. 260A of the IT Act, 1961 (for brevity, 'the Act') against the order of the Income -tax Appellate Tribunal, Chandigarh Bench 'A', Chandigarh (for brevity, 'the Tribunal') passed in ITA No. 200/Chd/1999, vide questions of law would arise for determination of this Court : "(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition made on account of interest on interest -free loans advanced by the assessee -company to its sister concern, M/s Swaraj Mazda Ltd. ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that deduction under s. 80M should be computed without apportioning any part of interest payment to the earning of the dividend -

(2.) BRIEF facts may first be noticed. The assessee -respondent is engaged in the business of production of tractors and its The AO completed the assessment under s. 143(3) and, inter alia, made the following additions, vide his order dt. 19th (i) Rs. 1,52,95,000 on account of interest on interest -free loans advanced by the assessee to its sister concern, M/s Swaraj Mazda Ltd. (ii) Addition on account of excess deduction claimed by the assessee under s. 80M. The assessee -company received dividend income amounting to Rs. 34,32,500 from M/s Swaraj Engineers Ltd. and Rs. 5,46,00,000 from UTI.

(3.) THE assessee had claimed deduction under s. 80M on the gross dividend income. The AO was of the view that the assessee had incurred Rs. 1,65,76,739 as interest on investments and Rs. 1,00,000 as administrative expenses to earn such dividend. He, thus, worked out the deduction under s. 80M after reducing expenses of Rs. 1,66,76,739 from the gross dividend income of Rs. 5,80,32,500 (Rs. 34,32,500 + Rs. 5,46,00,000).