Court affirms Commissioner and Tribunal decisions, directs Income Tax Officer on section 80M deductions.

The Court affirmed the decisions of the Commissioner (Appeals) and the Tribunal, ruling in favor of the assessee on both issues. It directed the Income Tax Officer to recompute deductions under section 80M based on gross dividends without deducting proportionate expenditure, as the shares held were considered as stock-in-trade, eliminating the need for apportionment between dividend and business income.

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Issues:
1. Whether the shares held by the assessee as stock-in-trade were the basis for receiving dividends.
2. Whether relief under section 80M of the Income-tax Act should be computed on gross dividends or after deducting proportionate expenditure.

Issue 1:
The assessees claimed deduction under section 80M of the Act on gross dividends, but the Income Tax Officer (ITO) estimated expenditure at 5% of the gross dividends due to lack of apportionment in the books of account. The Commissioner (Appeals) agreed with the assessees, stating that as dealers in shares, all expenditure incurred was related to their business, not requiring apportionment between business and dividend income.

Issue 2:
The Commissioner (Appeals) directed the ITO to recompute deductions under section 80M on gross dividends without deducting any alleged expenditure, citing a High Court decision that where shares are held as stock-in-trade, no apportionment of expenditure between dividend and business income is needed. The Tribunal upheld this decision, emphasizing that in such cases, the dividend income is considered business income, not requiring deduction of expenditure.

Additional Details:
The Tribunal referenced a case stating that when shares are held as stock-in-trade, there is no need to apportion expenditure between dividend and business income. The Court highlighted that apportionment is necessary only when different sources of income exist, and in the absence of specific expenditure, apportionment is not required. The Tribunal affirmed that relief under section 80M should be based on gross dividends without deducting proportionate expenditure, as done by the ITO.

Conclusion:
The Court affirmed the decisions of the Commissioner (Appeals) and the Tribunal, ruling in favor of the assessee on both issues and directing the ITO to recompute deductions under section 80M based on gross dividends.

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