UTI Master Shares dividend treated as unit income, with excess deduction restricted and revisionary relief sustained

Dividend received on UTI Master Shares issued under the Mutual Fund (Subsidiary) Unit Scheme, 1986 was treated as dividend from units of the Unit Trust of India for section 80M purposes. The proviso to section 80M was read as covering such dividend without creating a separate category for different UTI unit schemes, so the deduction was not available on a full basis beyond the limit applicable for the relevant assessment years. On that reasoning, an assessment allowing excess deduction was considered erroneous and prejudicial to revenue, supporting revisionary action under section 263.

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Issues: Whether dividend received on UTI Master Shares was eligible for full deduction under section 80M, and whether the revisionary order under section 263 restricting the deduction was justified.

Analysis: The Master Shares were issued under the Mutual Fund (Subsidiary) Unit Scheme, 1986 framed under section 21 of the Unit Trust of India Act, 1963, and were treated as another scheme of issuing units of UTI rather than as shares of a company distinct from UTI units. The proviso to section 80M granted deduction for income by way of dividend from the units of the Unit Trust of India and did not carve out any separate treatment for different unit schemes. On that footing, dividend from Master Shares fell within the proviso and was deductible only to the extent permitted for the relevant assessment years. The assessment allowing full deduction was therefore held to be erroneous and prejudicial to the interests of revenue, justifying exercise of revisionary power under section 263.

Conclusion: The restriction of deduction on dividend from UTI Master Shares was upheld, and the revision under section 263 was sustained.

Ratio Decidendi: Dividend received from Master Shares issued under a UTI subsidiary unit scheme is dividend from units of the Unit Trust of India for section 80M, and the Assessing Officer's order allowing excess deduction can be revised under section 263 when it is erroneous and prejudicial to the interests of revenue.

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