Exempt dividend income is not subject to section 115BBDA, so excluded from taxable computation and business profits corrected.

Dividend income exempt under section 10, including dividends under specified mutual funds and companies, is not includible in total income, and provisions applicable only to dividends chargeable to tax cannot be invoked; accordingly, section 115BBDA does not apply to exempt dividends and must not be applied in the tax computation. The computation sheet must be corrected by excluding the exempt dividend amount from taxable income, resulting in adjusted profits and gains of business as reflected in the corrected computation; the appeal is allowed on this ground in favour of the taxpayer.

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Issues: (i) Whether the addition of Rs. 1,34,44,852 in the computation sheet representing dividend income and the consequent application of section 115BBDA were sustainable, and whether the computation sheet should be corrected to exclude dividend income exempt under section 10.

Analysis: The Tribunal examined the assessment order and the attached computation sheet against the material placed before the Assessing Officer and the Commissioner of Income Tax (Appeals). The assessee had disclosed dividend receipts in the return and provided supporting details showing dividends from specified mutual funds and companies. The Tribunal considered the statutory exemptions under section 10(34) and section 10(35) and the condition for invocation of section 115BBDA which applies only to dividend income that is chargeable to tax. The Tribunal found that the Assessing Officer's main assessment recorded acceptance of the return, that the dividend particulars were examined and accepted, and that the computation sheet wrongly included exempt dividend income and applied section 115BBDA despite the dividends being exempt under section 10.

Conclusion: The addition of Rs. 1,34,44,852 in the computation sheet is incorrect and the computation sheet is to be corrected by treating profits and gains of business at Rs. 8,58,49,868 instead of Rs. 9,92,94,720; the appeal is allowed on this ground in favour of the assessee. The general ground is dismissed.

Ratio Decidendi: Dividend income exempt under section 10 (including sections 10(34) and 10(35)) is not includible in total income and section 115BBDA is not applicable to dividends that are exempt and not chargeable to tax.

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