Composite tea income deductions under section 80HHC precede apportionment, while section 80M relief is limited to computed dividend income.

For composite tea income, export-profit deduction under section 80HHC was required to be computed first on the composite income derived from tea, and only then was the resulting income to be apportioned between agricultural and non-agricultural components under rule 8(1); the deduction was therefore not deferred until after apportionment, and relief was allowed on that issue. By contrast, deduction under section 80M was confined to dividend income computed in accordance with the Act and could not be claimed on the gross dividend receipt; that claim was rejected, leaving the appeal partly successful.

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Issues: (i) Whether deduction under section 80HHC in respect of export profits from tea grown and manufactured by the assessee was to be allowed before apportionment of composite income under rule 8(1); and (ii) whether deduction under section 80M was to be allowed on the gross dividend income.

Issue (i): Whether deduction under section 80HHC in respect of export profits from tea grown and manufactured by the assessee was to be allowed before apportionment of composite income under rule 8(1).

Analysis: The applicable principle was the earlier binding view that, for composite tea income, the export-profit deduction under section 80HHC is to be worked out first on the composite income derived from tea, and only thereafter the resulting income is apportioned between agricultural and non-agricultural components under rule 8(1). The deduction is not postponed until after such apportionment.

Conclusion: The issue was answered in favour of the assessee.

Issue (ii): Whether deduction under section 80M was to be allowed on the gross dividend income.

Analysis: The governing principle applied was that relief under section 80M is confined to dividend income computed in accordance with the Act, meaning the dividend income that forms part of gross total income after permissible deductions, and not the full gross dividend receipt. On that footing, the assessee could not claim deduction on the gross dividend.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Final Conclusion: The appeal succeeded only in part, with the assessee obtaining relief on the section 80HHC questions while the section 80M and connected factual issues were decided against it.

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