1992 (1) TMI 145 - AT - Income Tax

Income Tax Appeal Decision: Deduction allowed under Section 80-O for foreign dividend income inclusion.

JB. Boda And Company Private Limited. Versus Income-Tax Officer.

JB. Boda And Company Private Limited. Versus Income-Tax Officer. - ITD 041, 036, Issues Involved:1. Deduction under Section 80-O2. Allocation of Expenditure3. Inclusion of Dividend Income4. Expenditure on Scientific Research and Rural Development (Sections 35(1)(ii) and 35CCA)Issue-wise Detailed Analysis:1. Deduction under Section 80-O:The appellant, a private limited company, claimed a deduction under Section 80-O for the assessment year 1986-87. The primary issue was the correct amount of expenditure that should be deducted from foreign commission earnings to determine the income eligible for deduction under Section 80-O. The appellant argued that the actual 80-O receipts should be Rs. 1.30 crores, as opposed to Rs. 1.02 crores, which was the figure in the revised return. However, this claim was not raised before the lower authorities and thus could not be entertained by the Tribunal. Consequently, the Tribunal upheld the figure of Rs. 1.02 crores as the 80-O receipts.2. Allocation of Expenditure:The appellant contended that certain expenditures, such as contributions to scientific research associations and rural development programs under Sections 35(1)(ii) and 35CCA, should not be included in the total expenses for calculating the deductible amount under Section 80-O. The Assessing Officer and the CIT (Appeals) disagreed, allocating all expenses, including these contributions, on a pro-rata basis. The Tribunal upheld this view, stating that these contributions are considered expenditures incurred for earning foreign commission and must be included in the computation of qualifying income.3. Inclusion of Dividend Income:The appellant argued that the total receipts for calculating the proportion of expenses should include both interest and dividend income. The CIT (Appeals) included interest but excluded dividend income, reasoning that the appellant had claimed a deduction under Section 80M for Indian dividends. The Tribunal agreed that only the Indian dividend income, which qualified for Section 80M relief, should be excluded. The foreign dividend income, amounting to Rs. 3.83 lakhs, should be included in the total receipts.4. Expenditure on Scientific Research and Rural Development (Sections 35(1)(ii) and 35CCA):The appellant argued that contributions under Sections 35(1)(ii) and 35CCA are not expenditures incurred for earning foreign commission but are sums paid by way of donations. The Tribunal rejected this argument, emphasizing that these sections contemplate expenditure on scientific research and rural development, which are deductible under the Act. The Tribunal noted that these expenditures are not similar to donations under Section 80G or 80GGA and must be included in the total expenses for computing the income eligible for deduction under Section 80-O.Conclusion:The Tribunal upheld the CIT (Appeals) decision to allow a deduction of Rs. 8,19,930 under Section 80-O, including the contributions under Sections 35(1)(ii) and 35CCA in the total expenses. However, it directed that only the Indian dividend income should be excluded from the total receipts, while the foreign dividend income should be included. The first ground of the appeal was partly allowed to this extent.