Dividend income assessment under other sources and section 80M deduction allowed for domestic company dividend receipts.

Dividend income received by an investment company was required to be assessed under the head "Income from other sources", with deductions confined to those specifically allowable under section 57. Because no qualifying dividend-realisation expenditure was shown, no further deduction under that provision was available. The same dividend income nevertheless qualified for deduction under section 80M, since both payer and recipient were domestic companies and the dividend arrangement satisfied the domestic-payment requirement. The computation rule under section 57 applied for assessment, but the assessee remained entitled to the section 80M deduction on the dividend income.

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Issues: Whether dividend income received by an investment company was liable to be computed under the head "Income from other sources" with deductions confined to section 57, and whether the assessee was entitled to deduction under section 80M.

Analysis: The assessee's only income for the year was dividend from shares held in another domestic company. The computation of such income had to be made under the provisions relating to income from other sources, irrespective of the assessee's claim that it carried on investment business. Under section 57, only the specified deduction connected with realisation of dividend was permissible, and no such expenditure was shown to have been incurred. At the same time, the entire dividend income qualified for deduction under section 80M, as both companies were domestic companies and the required arrangement for declaration and payment of dividend within India existed.

Conclusion: The assessee was entitled to deduction under section 80M on the dividend income, though the income had to be computed under section 57 for the purpose of assessment.

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