TaxTMI 
TaxTMI 
2010 (6) TMI 75
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....ether on the facts and in the circumstances of the case, the ITAT was right in law in holding that deduction u/s 80M should be computed without apportioning any part of interest payment to the earning of the dividend?." Brief facts may first be noticed. The assessee-respondent is engaged in the business of production of tractors and its spares. It filed return in respect of the assessment year 1995-96 on 29.11.1995 declaring an income of Rs. 29,68,55,610/-. However, on 22.5.1996, the assessee filed a revised return in which income was enhanced to Rs. 29,71,75,910/-. The Assessing Officer completed the assessment under Section 143(3) and, inter alia, made the following additions, vide his order dated 19.3.1998 (Annexure 'A'):- (i) Rs. 1,52,95,000/- on account of interest on interest-free loans advanced by the assessee to its sister concern, M/s Swaraj Mazda Ltd. (ii) Addition on account of excess deduction claimed by the assessee u/s 80M. The assessee-company received dividend income amounting to Rs. 34,32,500/- from M/s Swaraj Engineers Ltd. and Rs. 5,46,00,000/- from UTI. The assessee had claimed deduction under Section 80M on the gross dividend income. The Assessing O....
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....supra), the Tribunal decided the issue in favour of the assessee and against the revenue. Relevant finding recorded in para 14 of the aforesaid order are as under:- "14 We have heard both the parties and carefully considered their rival submissions with reference to the facts, evidence and material placed on record. We find that during the course of assessment proceedings, the assessee had clearly furnished monthwise details of interest free advances available with the assessee. These details show that the debit balance in the account of SML varied from Rs. 12.63 lacs to Rs. 97.67 lacs during the period from 1.4.90 to 31.3.91. As against the same the assessee had interest free advanced varying from Rs. 6.19 crores to Rs. 13.34 crores during the same period which far exceeded the amounts due from SML. The assessee had also furnished complete details before the CIT (A) to show that it had sufficient interest free advances. In order to disallow the interest, it was duty of the AO to controvert the factual submission by bringing further details or by calling further details from the assessee. Besides, the AO has also not established any direct nexus between the amounts borrowed on w....
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....is allowed from dividend income for the expenses by way of commission or bank charges for realization of dividend and any other expenditure laid out or expended wholly and exclusively for earning such income. Further the Hon'ble Supreme Court in the case of CIT V. United Trust Ltd. supra, has held that proportionate management expenses had to be deducted from the gross dividend income for the purpose of allowing relief u/s 80 M. Admittedly, the assessee has not maintained any such separate account for the same. Therefore, a reasonable estimate based on evidence and material on record is required to be made. We find that the AO has estimated the expenses @ 5% of the total dividend income without due application of mind. He has not taken into account the total dividend income, the number of companies from whom such dividend income was received and the probable expenses which could have been incurred for earning such income. From para 8.1 of the CIT (A)'s order, it is clear that out of total dividend income of Rs. 2,11,20,600/- the assessee had received dividend income of Rs. 2,02,97,000/- from UTI. Thus, only dividend income of about Rs. 8.00 lacs was received from other companies. T....
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....y of the assessee, in extending interest free loan. Since the needful had not been done by the Assessing Officer, as also, the Appellate Authorities, learned counsel for the parties are agreed that the orders passed by the Assessing Officer as well as the Appellate Authorities be set aside. Ordered accordingly. Learned counsel for the parties are also agreed that the adjudication of the present controversy be remanded back to the Income Tax Appellate Tribunal, Chandigarh, requiring it to readjudicate the issue whether the respondent-assessee is entitled to deduction under Section 36(1)(iii) of the Income Tax Act, 1961, on the interest component in respect of capital borrowed, based on the parameters laid down in S.A. Builders Ltd.'s case (supra), and while doing so, to grant liberty to the rival parties to lead evidence, if they so desire." Therefore, we adopt the same course for the sake of consistency and set aside the order of the Tribunal on the first question of law. Accordingly, the matter is remanded back to the Tribunal in terms of order of this Court passed in ITA Nos. 16 and 17 of 2004, dated 21.1.2009. The parties through their counsel are directed to appear bef....