Court rules on deductions for dividends and electricity charges under section 80M for AY 1995-96

The court upheld the disallowance of deductions for electricity charges and inter-corporate dividends under section 80M for the assessment year 1995-96. It was ruled that the deduction under section 80M is applicable only for dividends actually distributed to shareholders before the due date, not just declared. Additionally, the court dismissed the appeal regarding the disallowance of electricity charges incurred prior to April 1, 1994, stating that known expenditures should be provisioned for in advance, and past failures to account for such expenses do not justify claiming them in subsequent years.

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Issues:
1. Disallowance of deduction under section 80M for electricity charges and inter-corporate dividends.
2. Interpretation of section 80M in relation to the distribution of dividends.
3. Disallowance of electricity charges for the period prior to the assessment year.

Analysis:
1. The appellant claimed deductions for electricity charges and inter-corporate dividends under section 80M for the assessment year 1995-96. The Assessing Officer disallowed the deductions, which was upheld by the Commissioner of Income-tax and the Income-tax Appellate Tribunal. The Tribunal also remanded the matter back to the Assessing Officer for interest charges under section 234A of the Income-tax Act.

2. The appellant contended that a resolution approving the payment of proposed dividends was passed before the due date, entitling them to the deduction under section 80M. However, the court held that the deduction is for dividends actually distributed to shareholders before the due date, not just declared. Therefore, the resolution alone does not satisfy the requirement for claiming the deduction under section 80M.

3. The court also addressed the disallowance of electricity charges amounting to Rs. 2,10,845 for the period prior to April 1, 1994. The appellant argued that since the bill was received in a later year, the entire amount should be allowed as a deduction. However, the court ruled that known expenditures should be provisioned for in advance, and failure to do so in previous assessments does not warrant claiming the same expenditure in subsequent years. Consequently, the appeal was dismissed as no substantial question of law arose from the Tribunal's order.

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