1986 (1) TMI 126 - AT - Income Tax

Investment company allowed deduction under s. 80M for dividend income per Tribunal's decision

The Tribunal upheld the CIT(A)'s decision, allowing the assessee, treated as an investment company, to claim a deduction under s. 80M for dividend income ... - Issues:Appeal by Revenue and cross objection by assessee against CIT(A) order, treatment of dividend income, deduction under s. 80M of the Act.Analysis:The case involved an appeal by the Revenue and a cross objection by the assessee against the CIT(A) order, addressing common disputes. The assessee, a company, received a gross dividend during the relevant year and claimed various expenses against it. The ITO, while framing the assessment, did not grant deduction under s. 80M of the Act, determining the total income solely from the dividend income. The CIT(A) accepted the assessee's argument that it should be treated as an investment company and allowed the deduction under s. 80M, leading to the Revenue's appeal before the Tribunal.The Revenue contended that the CIT(A) erred in directing the ITO to treat the assessee as an investment company and allow the deduction under s. 80M. The Tribunal considered the submissions and upheld the CIT(A)'s decision, stating that the assessee was entitled to claim the deduction under s. 80M for the dividend income earned. The Tribunal emphasized that the income from dividend had to be computed as per the provisions of the Act, regardless of the nature of the assessee's business. Since no specific expenditure was incurred by the assessee for realizing the dividend, the entire dividend income qualified for deduction under s. 80M. The Tribunal directed the ITO to modify the assessment accordingly.The Tribunal dismissed the cross objections filed by the assessee, as they simply supported the CIT(A) order. Ultimately, both the appeal by the Revenue and the cross objection by the assessee were dismissed. The judgment clarified the eligibility of the assessee for deduction under s. 80M and emphasized the computation of income from dividend in accordance with the Act's provisions, irrespective of the nature of the assessee's business.