Section 80M relief on gross dividends rejected after retrospective section 80AA made dividend-related expenditure relevant.

Section 80M relief could not be computed on gross dividends without first considering expenditure relatable to earning those dividends, because the retrospective insertion of section 80AA with effect from 1 April 1968 displaced the earlier gross-dividend approach. The Court held that the amendment prevented relief being allowed on gross receipts alone. It also noted that the Tribunal had not decided the factual question whether any expenditure, including interest, was actually incurred in earning the dividends, and that this issue would need examination in further proceedings if appropriate relief was sought.

---

---

Issues: Whether relief under section 80M of the Income-tax Act, 1961, was to be computed with reference to gross dividends without deducting expenditure relatable to those dividends.

Analysis: The question was answered in the context of the retrospective insertion of section 80AA of the Income-tax Act, 1961, with effect from 1 April 1968. In view of that amendment, the earlier position supporting deduction on the basis of gross dividends could not be applied. The Court also noted that the factual question whether any expenditure, including interest, was in fact incurred for earning the dividends had not been decided by the Tribunal and would have to be examined if the assessee sought appropriate relief in further proceedings.

Conclusion: The question was answered in the negative, and relief under section 80M could not be allowed on gross dividends without regard to expenditure relatable to them.

---