Court allows full deduction of all expenses for assessee's business income, no apportionment with dividend income The High Court held that all expenses incurred by the assessee should be allowed as deductions under the head 'Profits and gains of business or ...
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Court allows full deduction of all expenses for assessee's business income, no apportionment with dividend income
The High Court held that all expenses incurred by the assessee should be allowed as deductions under the head "Profits and gains of business or profession" without any apportionment between business income and dividend income. The Court emphasized that when shares are held as circulating capital, all expenses, including interest, should be considered as business expenses. The judgment favored the assessee, with no costs awarded, aligning with previous decisions on the matter.
Issues Involved: The issue involves the apportionment of total expenditure incurred by the assessee between different heads of income for the assessment year 1973-74 under the Income-tax Act, 1961.
Summary: The case involved a limited company deriving income from various sources including interest on securities, business of purchase and sale of shares, and dividends. The Income-tax Officer allocated expenses towards earning dividend income, reducing the profits under the head "Profits and gains of business or profession." The Appellate Assistant Commissioner disagreed with this allocation, citing previous years' treatment of expenses. The Tribunal upheld the Appellate Assistant Commissioner's decision, emphasizing that all expenses should be allowed under the head "Profits and gains of business or profession."
The High Court referred to previous decisions where similar issues were addressed. It was established that when shares are held as circulating capital, and it's not possible to distinguish shares solely for earning dividends, all expenses, including interest, should be allowed as deductions in computing business profits. Therefore, there should be no allocation of expenses between business income and dividend income, and the entire income should be treated as business income.
In conclusion, the High Court answered the question in favor of the assessee, emphasizing that all expenses should be allowed under business income without any apportionment. The judgment was agreed upon by both judges, and no costs were awarded.
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